Deregulation, Consolidation, and Efficiency: Evidence from the Spanish Insurance Industry
AbstractThis paper provides new information on the effects of deregulation and consolidation in financial services markets by analyzing the Spanish insurance industry. The sample period 1989-98 spans the introduction of the European Union's (EU) Third Generation Insurance Directives, which deregulated the EU insurance market. Deregulation has led to dramatic changes in the Spanish insurance market; the number of firms declined by 35%, average firm size increased by 275%, and unit prices declined significantly in both life and non-life insurance. We analyze the causes and effects of consolidation using modern frontier efficiency analysis to estimate cost, technical, and allocative efficiency, as well as using Malmquist analysis to measure total factor productivity (TFP) change. The results show that many small, inefficient, and financially underperforming firms were eliminated from the market due to insolvency or liquidation. As a result, the market experienced significant growth in TFP over the sample period. Consolidation not only reduced the number of firms operating with increasing returns to scale but also increased the number operating with decreasing returns to scale. Hence, many large firms should focus on improving efficiency by adopting best practices rather than on further growth.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.
Volume (Year): 38 (2006)
Issue (Month): 2 (March)
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Fenn, Paul & Vencappa, Dev & Diacon, Stephen & Klumpes, Paul & O'Brien, Chris, 2008. "Market structure and the efficiency of European insurance companies: A stochastic frontier analysis," Journal of Banking & Finance, Elsevier, vol. 32(1), pages 86-100, January.
- Leverty, J. Tyler & Grace, Martin F., 2010. "The robustness of output measures in property-liability insurance efficiency studies," Journal of Banking & Finance, Elsevier, vol. 34(7), pages 1510-1524, July.
- Epure, Mircea & Kerstens, Kristiaan & Prior, Diego, 2011. "Technology-based total factor productivity and benchmarking: New proposals and an application," Omega, Elsevier, vol. 39(6), pages 608-619, December.
- Duarte Brito & Pedro Pereira & Joaquim Ramalho, 2013.
"Mergers, Coordinated Effects and Efficiency in the Portuguese Non-Life Insurance Industry,"
CEFAGE-UE Working Papers
2013_18, University of Evora, CEFAGE-UE (Portugal).
- Brito, Duarte & Pereira, Pedro & Ramalho, Joaquim J.S., 2013. "Mergers, coordinated effects and efficiency in the Portuguese non-life insurance industry," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 554-568.
- Van Der Marel, Erik & Shepherd, Ben, 2011.
"Services trade, regulation, and regional integration: Evidence from sectoral data,"
34343, University Library of Munich, Germany.
- Erik Marel & Ben Shepherd, 2013. "Services Trade, Regulation and Regional Integration: Evidence from Sectoral Data," The World Economy, Wiley Blackwell, vol. 36(11), pages 1393-1405, November.
- Jacob Bikker, 2012.
"Performance of the life insurance industry under pressure: efficiency, competition and consolidation,"
DNB Working Papers
357, Netherlands Central Bank, Research Department.
- J.A. Bikker, 2012. "Performance of the life insurance industry under pressure: efficiency, competition and consolidation," Working Papers 12-19, Utrecht School of Economics.
- Chen, Fu-Chiang & Liu, Z.-John & Kweh, Qian Long, 2014. "Intellectual capital and productivity of Malaysian general insurers," Economic Modelling, Elsevier, vol. 36(C), pages 413-420.
- Mahlberg, Bernhard & Url, Thomas, 2010. "Single Market effects on productivity in the German insurance industry," Journal of Banking & Finance, Elsevier, vol. 34(7), pages 1540-1548, July.
- Eling, Martin & Luhnen, Michael, 2010. "Efficiency in the international insurance industry: A cross-country comparison," Journal of Banking & Finance, Elsevier, vol. 34(7), pages 1497-1509, July.
- Biener, Christian & Eling, Martin, 2012. "Organization and efficiency in the international insurance industry: A cross-frontier analysis," European Journal of Operational Research, Elsevier, vol. 221(2), pages 454-468.
- Yap Yin Choo, 2012. "Efficiency and scale economies in the Japanese non-life insurance industry," International Journal of Financial Services Management, Inderscience Enterprises Ltd, vol. 5(3), pages 239-255.
- J. Cummins & Xiaoying Xie, 2013. "Efficiency, productivity, and scale economies in the U.S. property-liability insurance industry," Journal of Productivity Analysis, Springer, vol. 39(2), pages 141-164, April.
- Saowaros Yaisawarng & Preecha Asavadachanukorn & Suthathip Yaisawarng, 2014. "Efficiency and productivity in the Thai non-life insurance industry," Journal of Productivity Analysis, Springer, vol. 41(2), pages 291-306, April.
- Hela Miniaoui & Anissa Chaibi, 2014. "Technical Efficiency of Takaful Industry- A Comparative Study of Malaysia and GCC Countries," Working Papers 2014-055, Department of Research, Ipag Business School.
- Trigo Gamarra, Lucinda, 2008. "The effects of liberalization and deregulation on the performance of financial institutions: The case of the German life insurance market," Thuenen-Series of Applied Economic Theory 93, University of Rostock, Institute of Economics.
- Huang, Wei & Eling, Martin, 2013. "An efficiency comparison of the non-life insurance industry in the BRIC countries," European Journal of Operational Research, Elsevier, vol. 226(3), pages 577-591.
- Kerstens, Kristiaan & Van de Woestyne, Ignace, 2014. "Comparing Malmquist and Hicks–Moorsteen productivity indices: Exploring the impact of unbalanced vs. balanced panel data," European Journal of Operational Research, Elsevier, vol. 233(3), pages 749-758.
- Cummins, J. David & Xie, Xiaoying, 2008. "Mergers and acquisitions in the US property-liability insurance industry: Productivity and efficiency effects," Journal of Banking & Finance, Elsevier, vol. 32(1), pages 30-55, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.