The impact of the level of corporate social responsibility on financial performance: Evidence from insurance firms in the Czech Republic

The topic of Corporate Social Responsibility (CSR) has gained considerable popularity among researchers in recent decades in the Czech Republic. However, given this, no detailed study has been demonstrated on whether Czech insurance firms benefit from this. The paper uses an extensive content analysis method to investigate the impact of CSR on financial performance in 23 Czech insurance companies. These companies are included in the Czech Association of Insurance Companies, over the past years 2019 and 2020. Further, the GRI CSR Disclosure Index and correlation analysis are used. The results indicate a significant relationship between CSR disclosure and financial results. There is a linear positive relationship between CSR and ROE, and between CSR and ROA, even a significant one between CSR and ROE. The study suggests that insurance companies in the Czech Republic ought to make continuous efforts so that their CSR activities have a positive effect on their future development.

Cost stickiness and the firm’s organizational form: evidence from the property-liability insurance sector

We examine the existence of cost stickiness in the German property-liability insurance sector by analyzing if the percentage increase in administrative costs for a rise in premiums is larger than the percentage decrease in administrative costs for an equivalent drop in premiums. In addition, we analyze if sticky cost behavior depends on insurance firms’ organizational form. Using company-level data from German property-liability insurance firms for the years 2001–2017 and regression analyses, we find that administrative costs are sticky in the insurance sector, as administrative costs increase on average 0.82% per 1% increase in premiums but decrease only 0.6% per 1% decrease in premium income. Moreover, we find that stock insurers exhibit lower levels of cost stickiness, indicating better monitoring mechanisms.

Board attributes, ownership structure and risk management: A proposed model for insurance firms in Nigeria

As a response to the weaknesses in corporate governance and risk management created by the 2007/2008 financial crises, Enterprise Risk Management (ERM) becomes imperative, especially in the financial sector. Therefore, in understanding the board's responsibility in ensuring good governance through ERM implementation, two fundamental questions need to be answered; what determines the makeup of the board? And what determines boards' action? Consequently, this study proposed a conceptual framework for investigating the moderating role of ownership structure on the relationship between board attributes and risk management of insurance firms in Nigeria using the model approach. Hence, the control, resource acquisition, and service roles of the board as explained by agency, stewardship, and resource dependence theories explain this relationship. Board attributes are measured by board composition, board structure, board characteristics, and board process, ownership structure is measured by ownership concentration, board ownership, and foreign ownership, and ERM is measured using the disclosure index. Findings from the review of literature reveal that governance attributes in board attributes-risk management relationships have been measured on single or fragmented criteria, leading to contradictory or conflicting findings. Hence, the significance of the study lies in the conceptualization and choice of board attributes as explained by board roles and an integrative theoretical perspective to propose the choice of board attributes in the board attributes-risk management relationship and how ownership structure can influence the relationship, adding to the existing literature onboard attributes, ownership structure, and risk management.

Determinants of Financial Performance of Insurance Companies: Empirical Evidence Using Kenyan Data

The drivers of financial success of the insurance industry are of interest to several players in any economy including the government; policymakers; policyholders; and investors. In Kenya; there have been relatively few studies on this topic; most of which look at narrow elements that determine insurance companies’ performance. This article sought to explore the components contributing to the financial performance of insurance firms. We employed a sample consisting of 37 general insurers and 16 life insurers for the period running from 2009 to 2018 and utilised panel data methods in order to establish the determinants of financial performance of Kenyan insurers. The pooled OLS; fixed effects and random effects models were estimated with the financial performance measures (proxied by either ROA or ROE) as the dependent variables. The results of the study documented that insurer financial performance and size were positively related. The study also found that insurer financial performance was negatively related to the age variable. The study also unraveled that higher leveraged insurance companies performed better than their lowly geared peers. This article provides broad analyses of the various drivers of financial performance of the insurance industry in Kenya. The findings of this study contribute to the academic literature on the financial performance of the insurance sector in Kenya and Africa as a whole. Furthermore; it gives pointers to the management of insurance companies on the aspects of their business that would need greater attention to drive and sustain superior financial performance.

The Effects of ERM Adoption on European Insurance Firms Performance and Risks

We investigate the effects of adopting enterprise risk management (ERM) on the performance and risks of European publicly listed insurance firms. Using a dataset for 24 years, we report new results which show that ERM adopters realize significant ERM premiums after controlling for other covariates and endogeneity. Several firm characteristics such as size, opacity, and the choice of external monitoring agents such as auditors are significant determinants of adopting ERM. We fill a gap in the literature by assessing the impact of adopting ERM on firm risks and report new findings for our sample, which show that ERM adopters effectively reduce firm total and systematic risks and, to a greater extent, idiosyncratic risk. Firm-level variables such as size, leverage, dividend payments events, and diversification impact firm total risk. Insurers use corporate events such as dividend payments to signal information about reducing risk. Industry and international diversification reduce firm total risk and idiosyncratic risk, respectively.

How regulatory changes are driven by a need for control in reputational scandals: a case study in the German insurance industry

Purpose This paper aims to contribute to the understanding of the mechanisms that evolve during reputational scandals and lead to changes in industry regulation. It explores the processes by which a demand for external industry regulation evolves, also addressing the consequences of firms’ competitive behaviors which lead to substantial misbehavior and the destruction of reputational capital. The authors are interested in whether and how regulatory activities – in the case analyzed here, changes in insurance regulation regarding sales commissions for insurance brokers – are used as a costly, external behavioral control mechanism (third-loop learning) to terminate a reputational scandal that cannot be stopped by internal controls at a firm level (first-loop and second-loop learning) anymore. Design/methodology/approach The paper explores a real-life case in the German insurance industry that peaked in 2012 and has been well documented by broad media coverage, complemented by interviews with leading industry representatives. Using causal process tracing as a methodology, the authors study the factors in the case that led to an industry scandal. The authors further analyze why the insurance firms involved were not able to limit the scandal’s impact by internally controlling their behaviors, but had to call for external regulation, thus imposing costly restrictions on sales and contract processes. To identify the mechanisms underlying this result, theories from the fields of economics (game theory) and sociology (vicious cycle of bureaucracies), as well as organizational learning theory, are used. Findings The authors find that individual rationality does not suffice to prevent insurance firms from scandalous business practices, e.g. via implementing appropriate internal behavioral control measures within their organizations. If, as a result, misbehavior leads to reputational scandals, and the destruction of reputational capital spills over to the whole industry, a vicious cycle is set in motion which can be terminated by regulation as an externally enforced control mechanism. Research limitations/implications This study is limited to the analysis of a single case study, combining published materials, e.g. broad media coverage, with interviews from representatives of the insurance industry. Nevertheless, the underlying mechanisms that have been identified can be used in other case studies as well. Practical implications The paper shows that if firms want to avoid increasing regulation, they must implement strong reputational risk management (RRM) to counteract short-term profit pressure and to avoid restrictive regulation imposed on the industry as a whole. Furthermore, it sheds light on the relevance of spillover effects for RRM, as not only employee behavior within an organization might lead to the destruction of reputational capital but also that from other firms, e.g. from elsewhere within an industry. Originality/value The paper contributes by emphasizing a direct causal link between corporate scandals, loss of reputation and regulatory change within the insurance industry. Furthermore, the paper contributes by combining economic theories with organizational theories to understand real-life phenomena.

Working Capital Management on Profitability and Earning Assets of Insurance Industry in Egypt

This paper is an attempt to investigate the effect of working capital management, measured by (Current Ratio, Quick Ratio and Liquidity)on dependent variables (Return on Assets, Return on Equity and Earning Assets (Asset Quality) of insurance firms in Egypt, the study sample is 49% from total insurance firms working of the insurance market in Egypt in 1999- 2019.A structural equation modelling was selected to construct of the model of this study, The evidences show that There is a positive significant effect on construct of the independent variables, current ratio (x1), quick ratio (x2), and liquidity (x3) on construct of the dependent variables in terms of Return on Equity (Y1), at a probability level less than (0.001). This validates the first hypothesis; the independent variables Current Ratio(x1), Quick Ratio(x2), and Liquidity(x3) have a significant effect on the dependent variables Return on Equity (Y1), There is a positive significant effect on the construct of the independent variables, Current Ratio (x1), Quick Ratio (x2), and Liquidity (x3) on the construct of the dependent variables in terms of Earning Assets (Asset Quality) (Y3), probability level less than (0.001). This validates of the third hypothesis; the independent variables in terms of Current Ratio (x1), Quick Ratio (x2), and Liquidity (x3) have a significant effect on (Earning Assets) Asset Quality (Y3).