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Studies on the Determinants of Efficiency in Taiwanese Life Insurance Industry - Application of Bootstrapped Truncated Model

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  • Kuan-Chen Chen
  • Chung-I Lin

Abstract

Using 2009–2017 Taiwanese insurance company data from the database of Taiwan Economic Journal, we employ Simar–Wilson bootstrapping to prevent efficiency overestimation in data envelopment analysis (DEA) and then regress the factors on these efficiency scores by using a truncated rather than traditional Tobit model. Evidence shows that the companies’ modified average efficiency score is 0.8784 (0.9068 using DEA). Meanwhile, domestic insurers outperform foreign insurers, and larger companies perform more poorly. Market share positively affects operational performance; performance improves over time. However, irrespective of whether insurer is a subsidiary of financial holding company or domestic company in Taiwan, operational performance is not statistically different. Finally, we find that traditional Tobit regression underestimates the marginal effects of explanatory variables.  JEL classification numbers: C34, D24, G22 Keywords: data envelopment analysis, bootstrap procedure, truncated regression model, technical efficiency

Suggested Citation

  • Kuan-Chen Chen & Chung-I Lin, 2020. "Studies on the Determinants of Efficiency in Taiwanese Life Insurance Industry - Application of Bootstrapped Truncated Model," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 10(1), pages 1-4.
    • Handle: RePEc:spt:apfiba:v:10:y:2020:i:1:f:10_1_4
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    More about this item

    Keywords

    data envelopment analysis; bootstrap procedure; truncated regression model; technical efficiency;
    All these keywords.

    JEL classification:

    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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