Corporate governance and performance in the UK insurance industry pre, during and post the global financial crisis

Abstract

Purpose Due to stakeholders’ concerns on the contribution of corporate governance in monitoring insurance companies during financial crisis, this study aims to investigate whether and how various corporate governance practices would have affected firm performance of listed and non-listed insurance firms in the UK during financial crisis. Design/methodology/approach This study uses a unique manually collected data set from listed and non-listed insurance firms in the UK and applies different regressions models to test the hypotheses and to address the endogeneity problem. Findings The findings show that board non-duality and the presence of a majority shareholder improve firm performance in insurance companies. Furthermore, the findings for the sub-samples indicate a stronger positive association between board of directors and firm performance in listed insurance companies after the financial crisis, while a positive impact has been found between large shareholders and external audit firms in non-listed insurance companies before and during the crisis. Practical implications The results offer important practical implications for the government, management, shareholders and policymakers. For example, regulators and policymakers should benefit from these results to revise the recommendations for corporate governance mechanisms that prove to be effective on firm performance, as well as those mechanisms that have different or unexpected effects among listed or non-listed firms and/or during the turbulent periods. Investors should be aware of those specific corporate governance mechanisms that would have higher effect on performance of UK insurance firms in which they are considering to invest in. Originality/value This study contributes to the current literature by exploring the effect of corporate governance on financial performance by comparing between listed and non-listed insurance companies during financial crisis. Further, to the best of the authors’ knowledge, this is the first study to use two new insurance-related performance measures, the revenue growth ratio and the adjusted combined ratio, as performance proxies to explore whether these new variables create any insights.

External Governance, Corporate Governance, Firm Performance and Economic Growth in the UK and India

“…Similarly, results show that the ICGI is positively significant in influencing both ROE (coefficient = 0.34) and Tobin's Q (coefficient = 0.42) in the UK. These findings corroborate those of several studies (Arora & Bodhanwala, 2018;Kaur & Vij, 2018;Varshney et al, 2012;Abdoush et al, 2016;Acharya et al, 2011;Gompers et al, 2003) whose governance index exhibited a positive relationship with the ROE and Al-Malkawi et al, (2014) andHaat et al, (2008) whose governance index exhibited a positive relationship with Tobin's Q. These results support the agency theory proposition that good corporate governance improves firm performance.…”

“…);Arora & Bodhanwala, (2018);Balasubramanian et al, (2010); Ben, (2014);Kaur & Vij, (2018);Mishra & Mohanty, (2014); Varshney et al, (2012) and Raithatha & Haldar, (2021) among others. Recently,Abdoush et al, (2016) developed a governance index for manufacturing firms in the UK. The index was used to measure the effect of corporate governance on the firm performance of Insurance companies.…”

Board governance and audit report lag in the light of big data adoption: the case of Egypt

“…The four independent variables indicated by BG were board size, board diversity, board independence and CEO duality. Board size is determined by natural log of total number of directors on BOD (Albitar et al , 2020; Ananzeh et al , 2022; Albitar et al , 2022; Abdoush et al , 2022). Board independence measured by number of independent directors as a percentage of total board members (Elmarzouky et al , 2021; Hussainey et al , 2022; Shohaieb et al , 2022).…”

The moderating effects of corporate governance and investment efficiency on the nexus between financial flexibility and firm performance

“…The relationship between corporate governance mechanisms and firms' performance has been examined in different contexts and settings. Though, the extant literature reveals various perspectives on the relationship between corporate governance mechanisms and firms' performance (Abdoush et al, 2022;Alkaraan et al, 2022;Albitar et al, 2022;.…”