Studies On The Relationship Between Capital Structure And Operating Efficiency Of China’s Property Insurance Industry

Property insurance industry has taken shape in China and played an importantrole in economic growth and social stability. However, China’s property insuranceindustry pursues size and development speed unilaterally because of neglectingoperating efficiency and development quality. The extensive development modelincreases operating risks. Insurance company should possess reasonable capitalstructure to cope with uncertain risks due to managing risks. As a financial institutionof liability operation, insurance company’s capital structure has the characteristics ofhigh debt ratio compared with the general industrial enterprise. Property and casualtyinsurance company’s warranty liability is more uncertain and fluid than life insurancecompany. The distinctiveness decides the importance of researching propertyinsurance industry’s capital structure. Therefore, this paper researched the questions ofproperty insurance industry’s capital structure in the view of operating efficiency.Firstly, the paper analyzed the capital structure of property insurance industry inChina theoretically. And it was used as the theoretical basis of continue studying.Secondly, the paper researched theoretical relations between capital structure andoperating efficiency of property insurance industry. And the paper researched capitalstructure direct effect mechanism on operating efficiency from the positive influenceof solvency and risk taking and the negative influence of financial difficulties andregulatory costs. Also, the paper researched indirect effect mechanism from equitystructure and debt structure. At the last, the paper carried on empirical research toanalyze the dynamic relation clearly. And the paper measured the sample company’soperating efficiency by DEA method and did the impulse response analysis andvariance decomposition by panel VAR model.Research shows that promotion of China’s property insurance industry operatingefficiency depends mainly on improvement of scale efficiency and is restricted bypure technology efficiency. Thus, it needs to improve the ability of resource using.The capital structure measured by asset-liability ratio index goes against promotingoperating efficiency in whether short period or long period. This suggests thatasset-liability ratio of China’s property insurance industry is unreasonable. Operatingefficiency influenced asset-liability ratio sluggishly. That is to say that operating efficiency in the short period is not conducive to asset-liability ratio increasing, but inthe long run operating efficiency is beneficial to restore asset-liability ratio to initiallevel. The capital structure measured by ratio of liability reserve funds and total assetsis conducive to promote operating efficiency in whether short period or long period.The influence is more effective in short period than long period and weakened in thelong run.