The Effect of Good Corporate Governance and Premium Growth on the Performance of Insurance Companies

Abstract

Objective - Insurance companies in Indonesia are considered an important part of society by the Indonesian government. Corporate governance was a major problem during the post-financial crisis period, particularly in emerging markets in Indonesia. Financial Institutions considered the possibility of increasing insurance premiums to cover their operating costs and increase their profits. The purpose of this study is to measure the effect of corporate governance and premium growth on the performance of the insurance sector, to determine the characteristics of good corporate governance. Methodology/Technique - The samples used in this study include insurance companies listed on the Indonesia Stock Exchange between 2011 and 2015. The data used in the study is derived from the Indonesian Stock Exchange Corner. The method of analysis used is descriptive statistics and linear regression. The research objectives are to analyze the influence of the independent variables on the dependent variable. A purposive sampling method is used to determine the sample size of the study. This method generated a sample of 9 commercial insurance companies. Findings - The findings show that corporate governance is significantly and positively related to ROA whereas Insurance Premiums are not significantly related to ROA. Novelty - Study suggests that the insurance companies must aim to improve corporate governance structures by finding solutions to existing problems and improving the management structures of the company, in order to attract future investment which will ultimately lead to an increase in ROA and ROE. Type of Paper: Empirical Keywords: Corporate Governance; Insurance Premium; Corporate Performance; Growth. JEL Classification: G22, L25, M41