A Research On The Impact Of Board Governance On Solvency Of Insurance Companies In China

Insurance industry is an important branch of financial industry,which has the function of financing and social management.In recent years,China's insurance industry has grown rapidly in terms of the number of companies and business scale,constantly catching up with developed countries.But at the same time of the rapid rise,insurance companies involved in high-risk projects and capital mismatches occur from time to time.Insurance companies should always be vigilant when dealing with risk issues in their development.With the deepening of the reform of the regulatory system and the further refinement and improvement of the regulatory system,the regulatory model of insurance companies has gradually changed from scale-oriented to risk-oriented.Under the background of strict supervision,insurance companies should also improve their own governance in order to better participate in national governance.This paper reviews the research on board governance,solvency of insurance companies,the relationship between insurance company governance and solvency and theories including principal-agent theory,stakeholder-governance theory,upper echelons theory and insurance company governance.On this basis,this paper selects 125 insurance companies in China as research samples,using the data of sample companies from 2015 to 2017,and establishes the research path of "board governance-corporate performance-solvency" of insurance companies.The paper takes solvency adequacy ratio as the explained variable,takes board governance factors including the proportions of directors of finance,actuary and educational backgrounds,board size,board independence and leadership structure as explanatory variables,and takes corporate performance as mediation variable,and empirically tests the impact of board governance on solvency and the mediating effect of corporate performance.Corporate performance,as an mediation variable,is calculated by factor analysis method with eight financial indicators,including net profit margin,return on asset,return on equity,payout ratio,return on investment,debt-asset rate,reinsurance rate and undue liability reserve extraction rate.In the empirical analysis,this paper chooses the mixed effect model for panel regression.Through empirical research,this paper finds that: firstly,the board governance of insurance companies has an impact on solvency,specifically,the financial and academic backgrounds of directors have positive influence on solvency in the level of personal qualities of directors;in the level of board structure,the size of the board of directors of insurance companies has a positive impact on solvency,and the independence of the board of directors has a negative impact on solvency.Secondly,in the impact of financial background of directors and board size on solvency adequacy ratio,corporate performance exerts partial mediating effect,and the mediating effect of corporate performance and direct effect are in the same direction.Based on the conclusion of the study,this paper puts forward some suggestions on the board governance and solvency: insurance companies ought to set up correct governance thinking and attach importance to corporate governance;when it comes to governance,not only should they pay attention to the improvement of the personal quality of directors,but also to the construction of the organizational structure of the board of directors.In addition,the external stakeholders should take measures to promote the development of insurance company governance practice,so that external governance and internal governance play complementary roles.