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The Impact of Organizational Structure and Business Strategy on Performance and Risk-Taking Behavior in Insurance Industry

Author

Listed:
  • Gene C. Lai
  • Lin-Yhi Chou
  • Lih Ru Chen

Abstract

This paper examines the impact of organizational structure and business strategy on company efficiency, profitability, and risk-taking behavior in the Taiwanese life insurance industry. The insurance industry in Taiwan provides an interesting environment for studying this issue because different organizational forms coexist in the insurance industry. We examine four different types of companies by organizational structure and two different business strategies. We use two frontier methodologies (stochastic frontier approach and data envelopment analysis approach) to measure the efficiency performance of insurance firms. The results show that organizational structures and business strategies have significant impact on efficiency, profitability, and risk-taking behavior. In addition, we also find size, lines of business, leverage ratio, and market share have significant impact on efficiency, profitability, and risk-taking behavior. Our overall evidence suggests that a more competitive environment should be encouraged in the Taiwanese insurance industry to improve the insurer efficiency.

Suggested Citation

  • Gene C. Lai & Lin-Yhi Chou & Lih Ru Chen, 2015. "The Impact of Organizational Structure and Business Strategy on Performance and Risk-Taking Behavior in Insurance Industry," Applied Finance and Accounting, Redfame publishing, vol. 1(2), pages 107-128, August.
    • Handle: RePEc:rfa:afajnl:v:1:y:2015:i:2:p:107-128
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    More about this item

    Keywords

    Efficiency; Profitability; Risk-Taking Behavior; Organizational Structure; Business Strategy;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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