Research On The Influence Of Corporate Governance On The Corporate Performance Of Chinese Life Insurance Companies

The theory of corporate governance is brought to a rise by the establishment of modern enterprise structure, and has drawn the close attention of various investors since its introduction to China in 1990 s. The theory of corporate governance focuses on the principal-agent problem in modern enterprise, seeking to raise corporate performance and competence in market through optimizing decision-making process. After more than 30 years of rapid development, life insurance industry in China has entered the transition phase, where the competition in life insurance market has become more intense under the gradual opening up of life insurance market and the diversification of market participants.Therefore, life insurance companies should reform the previous extensive development in the face of new challenges. A sound corporate governance system is favorable to deepening the structural reform, enhancing risk managing capability and promoting performance in China’s life insurance companies. Besides, the social significance in the nature of life insurance companies has attracted the attention of various stakeholders and external supervising bodies. Life insurance companies in China, showing different levels of development, are still in the early stage of optimizing corporate governance, whose positive effect is not yet reflected. Therefore, there are potentials to be exploited.Firstly, this paper, under the basic framework of corporate governance theory,concludes the uniqueness in China’s life insurance companies, and analyzes the current situation and problems, from 24 Chinese life insurance companies, in the four aspects of ownership structure, board of directors, board of supervisors and information disclosure.Then, factor analysis is adopted to establish the evaluating system to study the performance in the four aspects of solvency, profitability, operation and growth. Based on the factor analysis, this paper, in an attempt to study the possible influence on corporate performance, puts forward 7 hypotheses regarding the 4 aspects of ownership structure,board of directors, board of supervisors and information disclosure. A multiple linear regression model is established to test the hypotheses and 3 out of 7 manage to pass,which are: the proportion of the top 5 shareholders has a negative correlation to corporate performance; the size of board of directors has a negative correlation to corporate performance; the duality of chairman and general manager has a negative correlation tocorporate performance. Lastly, this paper propose several suggestions to improve the corporate performance of life insurance companies in China, including establishing an effective ownership structure, optimizing operations in board of directors and board of supervisors, and strengthening internal and external supervision to better protect the interest of all stakeholders, in order to improve corporate performance and to facilitate the transition to modern corporate governance.