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Organizational Structure and Performance: Evidence From the Nonlife Insurance Industry in Japan

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  • Gene C. Lai
  • Piman Limpaphayom

Abstract

This study examines the impact of organizational structure on firm performance, incentive problems, and financial decisions in the Japanese nonlife (property‐casualty) insurance industry. Stock companies that belong to one of six horizontal keiretsu groups have lower expenses and lower levels of free cash flow than independent stock and mutual insurance companies. Keiretsu insurers also have higher profitability and higher loss ratios than independent insurers. With a limited sample size, there is some evidence that mutual insurers have higher levels of free cash flows, higher investment incomes, and lower financial leverage than their stock counterparts. Overall, empirical evidence suggests that each structure has its own comparative advantage.

Suggested Citation

  • Gene C. Lai & Piman Limpaphayom, 2003. "Organizational Structure and Performance: Evidence From the Nonlife Insurance Industry in Japan," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 70(4), pages 735-757, December.
    • Handle: RePEc:bla:jrinsu:v:70:y:2003:i:4:p:735-757
    DOI: 10.1046/j.0022-4367.2003.00073.x
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    21. Chang, Vincent Y.L., 2023. "Do InsurTech startups disrupt the insurance industry?," Finance Research Letters, Elsevier, vol. 57(C).
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