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Globalization, political institutions, financial liberalization, and performance of the insurance industry

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  • Lee, Chien-Chiang
  • Lin, Chun-Wei

Abstract

This paper investigates the impacts of globalization, political institutions, and financial liberalization on the performance and risk-taking of insurance firms covering 1324 individual firms in 30 selected OECD countries. We find that greater globalization and a stable political institution lead insurance companies to exhibit a better performance—i.e., insurers adjust their strategies while being aware of institutional changes. By contrast, financial liberalization has an inverse impact on insurance company performance. Thus, greater globalization and a stable political environment both drive less risk-taking for insurers. These findings are particularly important to insurance markets’ competitors and national policymakers.

Suggested Citation

  • Lee, Chien-Chiang & Lin, Chun-Wei, 2016. "Globalization, political institutions, financial liberalization, and performance of the insurance industry," The North American Journal of Economics and Finance, Elsevier, vol. 36(C), pages 244-266.
  • Handle: RePEc:eee:ecofin:v:36:y:2016:i:c:p:244-266
    DOI: 10.1016/j.najef.2016.01.007
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    Keywords

    Insurance performance; Globalization; Political institutions; Financial liberalization; OECD;

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy

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