The Event
This event will discuss Insurance companies: their corporate governance structure and risk profile.
This research explores the importance of a rule-based governance paradigm on agency cost, risks and inclusion of insurance companies. Using a sample of 351 insurance companies across 5 regions. Firm-level data were collected from the LSEG database and the World Bank database used to collect country-level data.
The results confirm that insurance companies suffer greater agency costs, take lower risks and offer higher returns under a rule-based governance system. These results remain consistent with robust proxies and after endogeneity corrections.
It is also found that insurance companies with a rule-based governance, operating in a country with a rule-based system are higher performers when measured using return on asset and stock return. Our findings are in line with the prudent man hypothesis and offer policy implications for regulators and insurance industry practitioners.
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