Asia-Pacific Risk and Insurance Association Annual Conference, Chengdu, China.
Type
presentation
Date Issued
2016-08
Author(s)
Abstract (De)
We analyze the relationships among the three main strategic goals of every company: growth, profitability, and safety. Extant literature suggests that the relationships among these goals are two-directional and reciprocal. We therefore first-time develop a simultaneous equation model to empirically test three pairs of relationships simultaneously. We use a sample of 3,031 European insurance companies and account for firm characteristics, market conditions, and firm-year fixed effects. Our results suggest that a healthy growth has a positive impact on firm profitability; however, extremely high growth reduces the profitability. Furthermore, in line with the prospect theory, insurance companies tend to adjust their risk taking according to whether targeted profit-ability is reached. Our results emphasize existing results on underwriting discipline and that stra-tegic actions have to be coordinated to manage the trade-offs among growth, profitability, and safety.
HSG Classification
contribution to scientific community
Event Location
Southwestern University of Finance and Economics, Chengdu, China
Subject(s)
Eprints ID
248141