The determinants of corporate financial performance in the Bermuda insurance market

doi:10.1080/09603100210105030

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The determinants of corporate financial performance in the Bermuda insurance market

Journal Article•DOI•

The determinants of corporate financial performance in the Bermuda insurance market

Mike Adams¹, Mike Buckle¹•Institutions (1)

Swansea University¹

01 Jan 2003-Applied Financial Economics (Taylor & Francis Group)-Vol. 13, Iss: 2, pp 133-143

TL;DR: The authors examined the determinants of corporate underwriting and investment related financial performance in the Bermuda insurance market and found that, as expected, highly leveraged, lowly liquid companies and reinsurers have better operational performance than lowly leveraged and highly liquid companies.

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Abstract: Drawing a framework from the organizational economics literature this study examines the determinants of corporate (i.e. underwriting and investment related) financial performance in the Bermuda insurance market. Using panel data for 1993–1997, it was found that, as expected, highly leveraged, lowly liquid companies and reinsurers have better operational performance than lowly leveraged, highly liquid companies and direct insurers. Contrary to what was hypothesized, performance was positively related to underwriting risk. However, the size of companies and the scope of their activities were not found to be important explanatory factors.

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Journal Article•DOI•

Factors Affecting the Financial Performance of Jordanian Insurance Companies Listed at Amman Stock Exchange

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Amal Yassin Almajali, Sameer Ahmed Alamro, Yahya Zakarea Al-Soub

09 Apr 2012-Journal of Management and Research

TL;DR: In this paper, a study aimed at investigating the factors that mostly affect financial performance of Jordanian Insurance Companies is presented, which showed that the following variables (Leverage, liquidity, size, management competence index) have a positive statistical effect on the financial performance.

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Abstract: This study aimed at investigating the factors that mostly affect financial performance of Jordanian Insurance Companies. The study population consisted of all insurance companies' enlisted at Amman stock Exchange during the period (2002-2007) which count (25) insurance company. The data collected was analysed by using a number of basic statistical techniques such as T-test and Multiple- regression. The results showed that the following variables (Leverage, liquidity, Size, Management competence index) have a positive statistical effect on the financial performance of Jordanian Insurance Companies. The researcher recommended that a high consideration of increasing the company assets will lead to a good financial performance and there is a significant need to have highly qualified employees in the top managerial staff.

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256 citations

Journal Article•DOI•

Performance and size: empirical evidence from Portuguese SMEs

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Zélia Serrasqueiro, Paulo Maçãs Nunes

01 Jan 2008-Small Business Economics

TL;DR: In this paper, the relationship between company size and performance for small and medium-sized Portuguese companies was studied using dynamic panel estimators, and the authors concluded that performance is related positively to size.

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Abstract: This article studies the relationship between company size and performance for small and medium-sized Portuguese companies. Using dynamic panel estimators, we conclude that performance is related positively to size. This relationship suggests the greater relevance of scale effects, diversification and the greater ability of larger companies to cope with market changes. Furthermore, our empirical results show that performance is persistent, not showing discontinuity, suggesting that small and medium-sized Portuguese companies are relatively successful in coping with possible scenarios of aggressive competition. Debt and level of fixed assets influence performance negatively, and separation of management and ownership influence performance positively. Liquidity, risk and ownership control are not relevant in explaining the performance of small and medium-sized Portuguese companies.

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209 citations

Journal Article•DOI•

The economy, tourism growth and corporate performance in the Taiwanese hotel industry.

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Ming-Hsiang Chen¹•Institutions (1)

National Chung Cheng University¹

01 Oct 2010-Tourism Management

TL;DR: The impact of economy and tourism growth on the corporate performance of tourist hotels in Taiwan is investigated and the effects of changes in the state of economy can strongly explain ROA and ROE.

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170 citations

Cites background from "The determinants of corporate finan..."

...Adams and Buckle (2003) argue that large organizations can inhibit financial performance because of diseconomies of scale, resource misallocation, and the failure of managers to exploit output efficiencies. Chen and Soo (2007) also state that hotel companies provide many services that tourists demand....
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...Adams and Buckle (2003) argue that large organizations can inhibit financial performance because of diseconomies of scale, resource misallocation, and the failure of managers to exploit output efficiencies. Chen and Soo (2007) also state that hotel companies provide many services that tourists demand. Those services include accommodation, food, beverages and laundry, swimming pools, and conference facilities. The quality of these services, not hotel size, might be a more important factor in ensuring corporate performance in the tourist hotel industry. Second, this study demonstrates that the corporate performance in the tourist hotel industry is closely related to the state of economy and especially to tourism growth. Moreover, economic growth is highly correlated with tourism development. This supports the findings in Kim et al. (2006), who found a long-term association between economic growth and tourism expansion and a bi-directional causality between tourism and economic growth in Taiwan....
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...Adams and Buckle (2003) argue that large organizations can inhibit financial performance because of diseconomies of scale, resource misallocation, and the failure of managers to exploit output efficiencies....
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Journal Article•DOI•

Profitability determinants among micro firms: evidence from Swedish data

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Darush Yazdanfar¹•Institutions (1)

Mid Sweden University¹

10 Nov 2013-International Journal of Managerial Finance

TL;DR: In this article, the authors investigate the variables affecting firm profitability, applying the seemingly unrelated regression method to a large sample of approximately 87,000 observations covering 12,530 non-financial micro firms operating in four industry sectors, from 2006 to 2007.

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Abstract: Purpose – The purpose of this paper is to investigate the variables affecting firm profitability, applying the seemingly unrelated regression method to a large sample of approximately 87,000 observations covering 12,530 non‐financial micro firms operating in four industry sectors, from 2006 to 2007.Design/methodology/approach – The study considers profitability determinants at the firm as well as industry affiliation levels in examining hypotheses developed from resource‐based approaches. Seemingly unrelated regression (SUR) was used to detect the combination of variables that best estimated the impact of the explanatory variables on the dependent variable.Findings – The findings indicate that while firm size, lagged profitability, growth, and productivity positively influence profitability, firm age and industry affiliation negatively influence it. The empirical results suggest that productivity is the most significant determinant of profitability. These results are fairly robust across the various indus...

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150 citations

Journal Article•DOI•

Profitability in Portuguese service industries: a panel data approach

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Paulo Maçãs Nunes, Zélia M. Serrasqueiro, Tiago Neves Sequeira¹•Institutions (1)

Universidade Nova de Lisboa¹

08 Jun 2009-Service Industries Journal

TL;DR: In this article, the authors study the profitability determinants of Portuguese service industries and conclude that diversification of activities and motivation as well as the tendency to innovate contribute positively to increased profitability.

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Abstract: Based on various panel models, we study the profitability determinants of Portuguese service industries. The results obtained show that profitability is persistent over time, and that for larger companies with greater growth, a lower level of debt and lower level of fixed assets are more profitable. Considering the results obtained, we can conclude that diversification of activities and motivation as well as the tendency to innovate contribute positively to increased profitability in Portuguese service industries, whereas the need to pay off debt charges periodically harms profitability. The government would be well advised to create special credit channels that would permit the greater growth of Portuguese service industries, especially those most inclined to innovate.

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133 citations

Cites background or methods or result from "The determinants of corporate finan..."

...Adams and Buckle (2003) obtain a negative relationship between liquidity and profitability for insurance companies in Bermuda, whereas Goddard et al. (2005) obtain a positive relationship between liquidity and profitability in Belgian, French, Italian, Spanish and British service industries....
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...Adams and Buckle (2003) find a statistically insignificant relationship between the size of insurance companies in Bermuda and their profitability....
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...Adams and Buckle (2003) obtain a positive relationship between debt and profitability for insurance companies in Bermuda, the authors concluding that debt is used to discipline managerial action....
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...Adams and Buckle (2003) use static panel models to determine the relationship between profitability and its determinants....
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...The result obtained in this study, unlike those obtained by Adams and Buckle (2003) and Goddard et al. (2005), shows that liquidity is neutral in explaining the profitability of Portuguese service industries....
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References

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Journal Article•DOI•

Theory of the firm: Managerial behavior, agency costs and ownership structure

[...]

Michael C. Jensen¹, William H. Meckling¹•Institutions (1)

University of Rochester¹

01 Oct 1976-Journal of Financial Economics

TL;DR: In this article, the authors draw on recent progress in the theory of property rights, agency, and finance to develop a theory of ownership structure for the firm, which casts new light on and has implications for a variety of issues in the professional and popular literature.

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49,666 citations

Posted Content•

Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers

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Michael C. Jensen

01 Jan 1986-The American Economic Review

TL;DR: In this paper, the benefits of debt in reducing agency costs of free cash flows, how debt can substitute for dividends, why diversification programs are more likely to generate losses than takeovers or expansion in the same line of business or liquidationmotivated takeovers, and why the factors generating takeover activity in such diverse activities as broadcasting and tobacco are similar to those in oil.

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Abstract: The interests and incentives of managers and shareholders conflict over such issues as the optimal size of the firm and the payment of cash to shareholders. These conflicts are especially severe in firms with large free cash flows—more cash than profitable investment opportunities. The theory developed here explains 1) the benefits of debt in reducing agency costs of free cash flows, 2) how debt can substitute for dividends, 3) why “diversification” programs are more likely to generate losses than takeovers or expansion in the same line of business or liquidationmotivated takeovers, 4) why the factors generating takeover activity in such diverse activities as broadcasting and tobacco are similar to those in oil, and 5) why bidders and some targets tend to perform abnormally well prior to takeover.

...read moreread less

14,368 citations

Journal Article•DOI•

Agency Problems and the Theory of the Firm

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Eugene F. Fama

01 Apr 1980-Journal of Political Economy

TL;DR: In this article, the authors explain how the separation of security ownership and control, typical of large corporations, can be an efficient form of economic organization, and set aside the presumption that a corporation has owners in any meaningful sense.

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Abstract: This paper attempts to explain how the separation of security ownership and control, typical of large corporations, can be an efficient form of economic organization. We first set aside the presumption that a corporation has owners in any meaningful sense. The entrepreneur is also laid to rest, at least for the purposes of the large modern corporation. The two functions usually attributed to the entrepreneur--management and risk bearing--are treated as naturally separate factors within the set of contracts called a firm. The firm is disciplined by competition from other firms, which forces the evolution of devides for efficiently monitoring the performance of the entire team and of its individual members. Individual participants in the firm, and in particular its managers, face both the discipline and opportunities provided by the markets for their services, both within and outside the firm.

...read moreread less

8,222 citations

Book•

A Guide to Econometrics

[...]

Peter E. Kennedy

01 Jan 1979

TL;DR: The fourth edition of "A Guide to Econometrics" provides an overview of the subject and an intuitive feel for its concepts and techniques without the notation and technical detail often characteristic of econometric textbooks.

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Abstract: "Peter Kennedy's book, which provides intuitive, narrative explanations for a wide range of topics covered in undergraduate and graduate econometrics courses, occupies a unique position in the econometrics textbook market." -- David Ribar, Department of Economics, the George Washington University "A Guide to Econometrics" has established itself as the first-choice text for teachers and students throughout the world. It provides an overview of the subject and an intuitive feel for its concepts and techniques without the notation and technical detail often characteristic of econometrics textbooks. The fourth edition updates the contents and references thoughout, while retaining the basic structure and flavor of earlier editions. New material has been added on several topics, such as bootstrapping, count data, duration models, generalized method of moments, instrumental variable estimation, linear structural relations, Monte Carlo studies, neural nets, time series analysis, and VARs. A new appendix and a new type of exercise underline the importance of the sampling distribution concept.

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6,008 citations

Journal Article•DOI•

Performance Pay and Top Management Incentives

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Kevin Murphy¹, Michael C. Jensen•Institutions (1)

University of Southern California¹

08 Mar 2001-Social Science Research Network

TL;DR: For example, the authors estimates of the pay-performance relation (including pay, options, stockholdings, and dismissal) for chief executive officers indicate that CEO wealth changes $3.25 for every $1,000 change in shareholder wealth.

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Abstract: Our estimates of the pay-performance relation (including pay, options, stockholdings, and dismissal) for chief executive officers indicate that CEO wealth changes $3.25 for every $1,000 change in shareholder wealth. Although the incentives generated by stock ownership are large relative to pay and dismissal incentives, most CEOs hold trivial fractions of their firms' stock, and ownership levels have declined over the past 50 years. We hypothesize that public and private political forces impose constraints that reduce the pay-performance sensitivity. Declines in both the pay-performance relation and the level of CEO pay since the 1930s are consistent with this hypothesis.

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4,859 citations

"The determinants of corporate finan..." refers background in this paper

...For example, as job security and salary levels are often positively related to company size (Jensen and Murphy, 1990), managers have incentives to pursue corporate size-related objectives, such as increasing market share, rather than maximizing shareholders’ wealth....
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