Firm-specific,industry-specific and macroeconomic factors of life insurers’ profitability: Evidence from Canada |
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| Institution: | 1. Institute of China and Asia-Pacific Studies, National Sun Yat-sen University, Kaohsiung, Taiwan;2. Department of International Business, Providence University, Taichung, Taiwan;3. Department of Finance, National Sun Yat-sen University, Kaohsiung, Taiwan;1. College of Business, Korea Advanced Institute of Science and Technology, 85, Hoegi-ro, Dongdaemun-gu, Seoul 02455, Republic of Korea;2. College of Economics, Sungkyunkwan University, 25-2, Sungkyunkwan-ro, Jongno-gu, Seoul 03063, Republic of Korea;1. Département des sciences administratives, Université du Québec (Outaouais), Campus St. Jérôme, 5 rue St Joseph, St Jérôme, Québec J7Z 0B7, Canada;2. Université du Québec (Montréal), École des sciences de la gestion, 315 Ste.-Catherine est, R-2915, Montréal, Québec H2X 3X2, Canada;3. Chaire d’information financière et organisationnelle (Université du Québec à Montréal), and Université du Québec en Outaouais, Canada;1. Universidad Católica de Santiago de Guayaquil, Facultad de Ciencias Económicas y Administrativas, Departamento de Economía, Ecuador;2. Superintendencia de Compañías, Valores y Seguros, Dirección Nacional de Investigación y Estudios, Ecuador;3. Universidad ECOTEC, Facultad de Ciencias Económicas y Empresariales, Ecuador |
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| Abstract: | The purpose of this study is to examine the effects of firm-specific, industry-specific and macroeconomic factors on the performance of life insurance firms. This study focuses on the Canadian life insurance sector, which is the second largest and oldest financial services sector in Canada. Using an empirical framework that incorporates both fixed and dynamic panel models that control for endogeneity issues, this research finds that size, liquidity, and risk exposure of life insurers are significant factors in their profitability. Secondly, industry concentration (e.g., HHI) fail to provide any meaningful evidence to support the structure-conduct-performance (SCP) theory in the static panel models, but in the dynamic models, industry concentration tends to have negative impacts on profitability. Macroeconomic factors such as real GDP growth and equity market returns are found to be significant determinants of insurers’ profitability. Finally, the persistence of profits for life insurers’ seems to lag that of their financial services counterparts (e.g., banks). |
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| Keywords: | Insurance Profitability Canada Panel data |
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