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Risk, Capital, and Operating Efficiency: Evidence from Taiwan’s Life Insurance Market

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  • Jin-Li Hu
  • Hsueh-E Yu

Abstract

In this article, we investigate the relationships among risk, capital, and operating efficiency for Taiwanese life insurance companies from 2004 to 2009 by using the two-stage least-square approach. We find a positive relation between inefficiency and product risk. At the same time, efficient insurers are seen as taking higher asset risk than inefficient insurers. A contrasting finding also shows that the relationship between capital and product risk is positive, while the relationship between capital and asset risk is negative. Moreover, we present a negative relationship between inefficiency and capital level, indicating that well-capitalized insurers operate more efficiently than poorly capitalized insurers.

Suggested Citation

  • Jin-Li Hu & Hsueh-E Yu, 2015. "Risk, Capital, and Operating Efficiency: Evidence from Taiwan’s Life Insurance Market," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 51(S1), pages 121-132, January.
    • Handle: RePEc:mes:emfitr:v:51:y:2015:i:s1:p:s121-s132
    DOI: 10.1080/1540496X.2014.998907
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    Cited by:

    1. Saeed, Momna & Izzeldin, Marwan & Hassan, M. Kabir & Pappas, Vasileios, 2020. "The inter-temporal relationship between risk, capital and efficiency: The case of Islamic and conventional banks," Pacific-Basin Finance Journal, Elsevier, vol. 62(C).
    2. Huang, Tai-Hsin & Lin, Chung-I & Wu, Ruei-Cian, 2019. "Assessing the marketing and investment efficiency of Taiwan’s life insurance firms under network structures," The Quarterly Review of Economics and Finance, Elsevier, vol. 71(C), pages 132-147.

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