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Efficiency Comparisons between Mutual and Stock Life Insurance Companies

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  • M. F. Grace
  • L. A. Gardner

Abstract

This research examines the relationship between firm efficiency and choice of organizational form using a seven year panel data set of 586 life insurers. Our study window is from 1985 to 1991. We began the study with two questions in mind: "Do stocks and mutuals use different production technologies?" and "Are stocks and mutuals equally efficient or is one form relatively more efficient than the other?". Using some cost and error structure tests that resemble those found in recent efficiency studies, we find evidence that stocks and mutuals have distinctive cost structures and production technologies. Results also show that efficiency varies with organizational form, with stocks being more scale efficient than mutuals but mutuals being more X-efficient than stocks.

Suggested Citation

  • M. F. Grace & L. A. Gardner, 1994. "Efficiency Comparisons between Mutual and Stock Life Insurance Companies," Risk and Insurance 9407003, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpri:9407003
    Note: Postscript (ASCII) RMI GRACE2.ABS
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    References listed on IDEAS

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    11. Lamm-Tennant, Joan & Starks, Laura T, 1993. "Stock versus Mutual Ownership Structures: The Risk Implications," The Journal of Business, University of Chicago Press, vol. 66(1), pages 29-46, January.
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