Impact of Ownership Structure and Business Diversifications on the Risk-Taking Behaviors of Insurance Companies in Vietnam

Abstract

This study analyzes the impacts of ownership structure and business diversifications on the risk-taking behaviors of insurance companies in Vietnam. Foreign ownership and institutional ownership in the insurance sector are increasing significantly due to the privatization trend in Vietnam. Besides, business diversification allows insurance firms to maximize profits and reduce insolvency. Therefore, this study enriches the current literature because it is the first to examine how ownership and diversifications affect the risk-taking behaviors of insurance companies in Vietnam. We employ the Ordinary Least Squares, Fixed Effect Models, Random Effect Models, Generalized Least Squares, and dynamic system Generalized Methods of Moments to analyze 42 insurance companies from 2005 to 2020. Our findings indicate that business diversification increases the risk-taking behaviors of insurance firms. We also figure out a U-shaped relationship between institutional ownership and risk-taking behavior, with a turning point of 9.8%. This study also indicates an inverse U-shaped relationship between foreign ownership and insurers’ risk-taking behaviors, with a turning point of 20%. Thirdly, the interaction terms between ownership and diversification suggest the moderate role of business diversification in increasing the risk of insurance firms. Our findings align with agency theory, stakeholder theory, monitoring hypothesis, expropriation hypothesis, and prior literature. This study contributes practical implications for managers and policymakers to develop the insurance sector sustainably.

Determinants of Tax Aggressiveness in Mining Companies Listed on the IDX

“…Community and environmental issues do not increase institutional ownership found that the presence of institutional investors with a wealth of expertise helps financial firms benefit from more sophisticated activities (Lyssimachou & Bilinski, 2023). Duong, Le, Nguyen, and Le (2023) they concluded that financial firms acting as institutional investors would benefit from diversification activities and will experience higher profits and fewer bankruptcies. Based on the findings of prior studies, it may be inferred that the hypothesis: H2: Institutional Ownership Has a Positive Effect on Tax Aggressiveness.…”