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Does Ownership Structure Matter? A Cost Efficiency Study Of Life Insurance Firms In Indonesia

Author

Listed:
  • Riski Wicaksono

    (Universitas Sebelas Maret)

  • Tri Mulyaningsih

    (Universitas Sebelas Maret)

Abstract

This paper is about the cost and profit efficiency of Indonesia’s life insurance industry. Using data from 2010–2014, we compare cost and profit efficiency among local and joint venture insurers. Our empirical analysis, based on a time-invariant translog cost model, reveals mean cost allocation and profit efficiency scores of 0.36 and 0.52, respectively. Interestingly, we find that domestic insurers are more cost efficient compared to joint venture insurers; however, joint venture insurers maximize profit more.

Suggested Citation

  • Riski Wicaksono & Tri Mulyaningsih, 2019. "Does Ownership Structure Matter? A Cost Efficiency Study Of Life Insurance Firms In Indonesia," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 22(3), pages 367-382, October.
    • Handle: RePEc:idn:journl:v:22:y:2019:i:3f:p:367-382
    DOI: https://doi.org/10.21098/bemp.v22i3.957
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    More about this item

    Keywords

    Life insurance industry; Insurers; Cost efficiency; Profit efficiency; Translog model;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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