Corporate Governance and Efficiency: Evidence From U.S. Property–Liability Insurance Industry |
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| Authors: | Li‐Ying Huang Gene C. Lai Michael McNamara Jennifer Wang |
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| Affiliation: | 1. Li‐Ying Huang is Assistant Professor at Overseas Chinese University in Taiwan;2. Gene C. Lai is the Safeco Distinguished Professor of Insurance, Department of Finance and Management Science, Washington State University;3. Michael McNamara is an Associate Professor at Washington State University;4. Jennifer Wang is Professor and Chairperson of Risk Management and Insurance Department, National Cheng‐Chi University, and Research fellow of Risk and Insurance Research Center (RIRC), National Cheng‐Chi University. The authors can be contacted via e‐mail: genelai@wsu.edu. |
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| Abstract: | This study examines the relation between corporate governance and the efficiency of the U.S. property–liability insurance industry during the period from 2000 to 2007. We find a significant relation between efficiency and corporate governance (board size, proportion of independent directors on the audit committee, proportion of financial experts on the audit committee, director tenure, proportion of block shareholding, average number of directorships, proportion of insiders on the board, and auditor dependence). We also find property–liability insurers have complied with the Sarbanes‐Oxley Act (SOX) to a large extent. Although SOX achieved the goal of greater auditor independence and might have prevented Enron‐like scandals, it had some unexpected effects. For example, insurers became less efficient when they had more independent auditors because the insurers were unable to recoup the benefits of auditor independence. |
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