Research Analysis Of The Impact Of Capital Structure On Solvency Of Life Insurance Companies In China

With the development of China’s insurance industry and the increasing awareness of national insurance,life insurance companies have gradually become an indispensable link in the social security system,and whether the legitimate rights and interests of the insured can be protected depends largely on the solvency level of life insurance companies.With the expansion of the company’s own development,the demand for capital will become bigger and bigger,and more capital will be consumed to maintain adequate solvency levels.Therefore,one of the real problems facing the development of life insurance companies is the contradiction between the need for capital acquisition and the maintenance of solvency,so how to regulate the relevant capital to optimize the capital structure of the company,so that it can not only meet the requirements of solvency regulation,but also ensure the stability of the company’s operation and maximize shareholders’ income,has gradually become an issue of research by scholars and industry discussions.Firstly,this paper composes the relevant literature of domestic and foreign scholars on the research content of this paper through the literature analysis method,mainly including the relevant researches on the factors affecting the solvency of insurance companies and the relationship between capital structure and solvency of insurance companies,and summarizes the literature.Then,the concepts of solvency and capital structure are defined and the important capital structure related theories covered in this paper are elaborated.Next,an in-depth analysis of the development status and influencing factors of capital structure and solvency of life insurance companies in China is presented,as well as an elaboration of the mechanism by which capital structure affects solvency through company performance.Then,based on the financial data of the 26 life insurance companies screened from 2016-2021,the scores of company performance were assessed by first extracting principal component variables from relevant indicators using principal component analysis.Then a multiple linear regression model was constructed to analyze the direct and indirect effects between capital structure and solvency of life insurance companies,where the relationship between capital structure and firm performance was also analyzed in order to explore the indirect effects in order to calculate the extent of the mediating effect,and finally to establish the capital structure-firm performance-solvency The research path of capital structure-firm performancesolvency is finally established.In order to verify the robustness of the results of the mediating effect model used,the Sobel and Bootstrap methods are used to conduct robustness tests.Finally,based on the theoretical and empirical analyses and combined with the actual basic situation of China’s life insurance market,this paper finally obtains the following conclusions: ○1 ss the proportion of debt capital of life insurance companies increases,the solvency level will show a continuous decreasing trend if a stable profit replenishment channel cannot be formed in terms of capital utilization;○2 Reducing the equity capital of life insurance companies can reduce agency costs and improve capital Reducing the equity capital of life insurance companies can reduce agency costs and improve the efficiency of capital utilization,thus having a positive impact on company performance;○3 Improving company performance can reduce the need of life insurance companies for supplementary equity capital,thus slowing down the declining trend of solvency level.In view of this,from the perspectives of how life insurance companies can optimize their capital structure,expand financing channels,and adjust their investment strategies,this paper puts forward relevant policy recommendations to help life insurance companies improve their solvency.