Efficiency and Profitability in the Global Insurance Industry
Journal
Pacific-Basin Finance Journal
ISSN
0927-538X
Type
journal article
Date Issued
2019-10
Author(s)
Abstract
We examine the relationship between firm efficiency (E) and profitability (P) with a global dataset of over 5000 insurance companies. Consistent with previous studies in banking and insurance, we document a significantly positive correlation between the efficiency measures and profitability measures. Beyond the extant evidence, we find significant industry dependency in the E-P relationship driven by industry idiosyncrasies, whereas efficiency is more critical to the profitability of life insurers than to that of nonlife insurers. We also show that the E-P relationship is nonlinear: the marginal impact of efficiency on profitability decreases as the insurer's efficiency is close to the best practice.
Language
English
HSG Classification
contribution to scientific community
Refereed
Yes
Volume
57
Number
101190
Start page
1
End page
12
Division(s)
Eprints ID
259920