Product diversification, business structure, and firm performance in Taiwanese property and liability insurance sector

Abstract

Purpose The purpose of this study is to analyze product diversification, business structure and insurer performance with a comprehensive look at the property-liability (P/L) insurance operations. Design/methodology/approach Using a panel data, this study employs an ordinary least squares regression model, fixed effects model and random effects model to examine the impact of product diversification and business structure on the performance of P/L insurers. The study assesses insurer performance using both risk-adjusted return on assets and risk-adjusted return on equity. Findings The study finds that product diversification is significantly negatively related to the performance of P/L insurers. The results are consistent with the diversification discount theory. The empirical results reveal that business lines have significant impacts on firm performance, particularly on the lines of fire and marine insurances. Furthermore, the interaction between product diversification and firm size implies that product diversification significantly increases the performance of large-sized insurance firms. Originality/value The study provides some valuable insights into the effects of diversification and business structure on the performance of P/L insurers in a developing country. The study’s findings suggest that management of P/L insurers should clarify their objectives and carefully assess the company’s resources when dealing with product diversification and business structure. The results have practical implications for the financial services industry in Taiwan.

Spillover effects of increased health insurance enrollment on workers’ compensation insurance

“…Additional studies that explore spillover effects within the insurance industry consider the direct comovement of stock returns across life insurers, PC insurers, and accident and health insurers-three distinct but related markets (Carson, Elyasiani, & Mansur, 2008). Adams & Jiang, 2017;Ames, Hines, & Sankara, 2018;He, Sommer, & Xie, 2011) and firm diversification (e.g., Ai, Bajtelsmit, & Wang, 2018;Elango, Ma, & Pope, 2008;Lee, 2017;Liebenberg & Sommer, 2008;Morris, Fier, & Liebenberg, 2017). Other studies examine performance within a specific line of business, such as automobile insurance (e.g., Bajtelsmit & Bouzouita, 1998;Weiss & Choi, 2008) or medical malpractice insurance (e.g., Born & Boyer, 2011;Lei & Schmit, 2010;Viscusi & Born, 2005).…”

Product diversification strategies: A review of Managerial skills for firm performance

“…Sometimes diversification has also a negative relationship firm performance (Lee, 2017). Today markets expected to face more challenges and increasing high competition.…”

“…Managers need to have clear their objectives and carefully work with the firm resources when driving to product diversification and business structure. Lee has not clarified the real skills effect in the diversification-performance (Lee, 2017). Also the value firms achieve through product diversification can depending on both on the specific environmental dependency of the current environment and time period dependency.…”

“…The size of the firm and the product diversification involves that there are increasing results of product diversification in large size firms. There is high-value points that the diversification effects and business structure for the firm performances in countries that are under developing (Lee, 2017). In many countries a product diversification strategy is used highly to increase the financial performance.…”

“…Product diversification can significantly examine the performance in differently sized firms. Therefore future research can be developed with above managerial skills with the product diversification strategies (Lee, 2017) There are areas that related to different views or models need to consider as -environment-dependent‖ and -time-dependent‖ for diversification strategies. It reasons out by advising a framework in guiding to future researches (Osorio, B.…”