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The Influence Of Corporate Governance On Performance Of Insurance Companies Based On Structural Equation Modeling

Posted on:2020-11-15Degree:MasterType:Thesis
Country:ChinaCandidate:B H LiuFull Text:PDF
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Improving the corporate governance structure is considered to be the core content of the modern enterprise system and the core of the insurance Industry's competitiveness.This paper makes a preliminary exploration of the relationship between corporate governance mechanisms and corporate performance in China's insurance industry and attempts to explore whether the existing major corporate governance factors play a substantial role in China and propose several rationalization suggestions.At present,the researches on corporate governance and financial institution performance are mostly focus on banks.Compared with other financial institutions,insurance companies have characteristics of high-leveraged in capital structure,decentralized creditors,long-term insurance contracts and professional insurance products,which determine that the corporate governance in insurance companies should pay attention to not only the interests of the company and shareholders,but also the rights and interests of policyholders.In recent years,the problems of corporate governance of insurance companies have become increasingly prominent.Some decisions made by insurance companies'boards of directors are lack of scientific and comprehensive.The supervisory role of the board of supervisors is not taken seriously.The management is excessively radical,resulting in serious mismatches in assets and liabilities and potential liquidity risk.Some insurance companies have inadequate internal governance systems and large shareholder control.Some insurance companies still have insufficient solvency,which brings hidden dangers to shareholders,policyholders and even the insurance industry.At the same time,some insurance products are embedded with other financial products,increasing operating leverage,leading to rapid accumulation of industry risks and cross-contagion to other financial industries.It is imperative to establish a sound and comprehensive corporate governance system.Based on the literature and fundamental theories of corporate governance,combined with the particularity of corporate governance in China's insurance industry,this paper analyzes and summarizes some key factors in China's existing insurance companies' corporate governance mechanisms and the possible impacts of various factors on company performance,and then makes four hypotheses.In the empirical part,this paper uses Structural Equation Modeling method and divides the corporate governance mechanism into internal governance mechanism and external governance mechanism.The internal governance mechanism involves equity structure,board of directors and board of supervisors while external governance mechanism involves external supervision,insurance market and media supervision.Structural equation models constructed in this paper include five latent variables of equity dispersion,operation effectiveness of the board of directors,supervision of the board of supervisors,external governance mechanisms and corporate performance.According to the theoretical analysis and actual situation of corporate governance in the insurance industry,ten observed variables are selected to describe these five latent variables.Since that most of China' s insurance companies are private,information on operations is to some extent not that transparent.The data is all obtained by hand from YEARBOOK OF CHINA'S INSURANCE,CSMAR database,Cnki full-text database of major Chinese newspapers and financial statements of each insurance company and data of media supervision variable will be measured by the number of press coverage of 19 authoritative newspapers in China.These data cover the main listed and unlisted insurance companies in China from 2016 to 2018.After deleting the missing data,I finally get a total sample size of 266,involving 53 life insurance companies and 38 property insurance companies.The empirical results determine the corporate governance have a significant impact on performance of insurance companies in China.An effective board of directors is associated with good performance.Less concentration of ownership structure,supervision of the board of supervisors and pressure from external governance mechanisms including regulators,market power and the media could benefit effectiveness of the board's decision-making.
Keywords/Search Tags:Corporate governance, Internal corporate governance mechanism, External corporate governance mechanism, Corporate performance, Structural equation model
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