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Business Failure, Efficiency, and Volatility: Evidence from the European Insurance Industry
Journal
International Review of Financial Analysis
ISSN
1057-5219
Type
journal article
Date Issued
2018
Author(s)
Abstract (De)
We analyze the operations and performance of insurance companies that left the insurance market from 2006 to 2013. Using a large European sample (2060 insurers from 16 countries and 250 failure events), we find that technical efficiency negatively and business volatility positively correlate with the probability of failure. Moreover, we document that firm growth has a U-shaped, nonlinear impact on failure probability. The research is original, in that we demonstrate the persistency of technical efficiency and business volatility in terms of early surveillance, extending valuable response time and thus broadening the available measures to prevent failures. We also demonstrate our identified failure indicators' applicability across financial crises and different regulatory philosophies. We apply the state-of-the-art data envelopment analysis, rare event logistic regression, hazard model of time to failure, and supporting vector machine approaches to the business failure prediction.
Language
English
HSG Classification
contribution to scientific community
HSG Profile Area
SOF - System-wide Risk in the Financial System
Refereed
Yes
Publisher
Elsevier
Publisher place
Amsterdam
Volume
59
Start page
58
End page
76
Pages
19
Subject(s)
Division(s)
Eprints ID
254629