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Capital Market Development, Competition, Property Rights, and the Value of Insurer Product‐Line Diversification: A Cross‐Country Analysis
Author(s) -
BerryStölzle Thomas R.,
Hoyt Robert E.,
Wende Sabine
Publication year - 2013
Publication title -
journal of risk and insurance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.055
H-Index - 63
eISSN - 1539-6975
pISSN - 0022-4367
DOI - 10.1111/j.1539-6975.2012.01470.x
Subject(s) - diversification (marketing strategy) , competitor analysis , business , product market , capital market , property rights , homogeneous , competition (biology) , bancassurance , industrial organization , monetary economics , economics , finance , market economy , general insurance , insurance policy , microeconomics , risk pool , marketing , incentive , ecology , physics , biology , thermodynamics
A bstract In this article, we show that the effect of product diversification on performance is not homogeneous across countries. Diversified insurance companies perform significantly worse than their focused competitors in countries with well‐developed capital markets, high levels of property rights protection, and high levels of competition. In addition, we find that the diversification–performance relationship for insurance companies depends on company size. For large insurers operating in countries with less developed capital markets, diversification significantly increases performance. Our results suggest that the optimal organizational structure may be different for insurers operating in emerging economies than for insurers operating in developed countries.