Corporate Governance and Efficiency: Evidence from U.S. Property–Liability Insurance Industry

32 Pages Posted: 27 Aug 2011

See all articles by Li‐Ying Huang

Li‐Ying Huang

affiliation not provided to SSRN

Gene C. Lai

affiliation not provided to SSRN

Michael J. McNamara

Washington State University - Department of Finance, Insurance and Real Estate

Jennifer L. Wang

National Chengchi University - Department of Risk Management and Insurance

Date Written: September 2011

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.

Suggested Citation

Huang, Li‐Ying and Lai, Gene C. and McNamara, Michael J. and Wang, Jennifer L., Corporate Governance and Efficiency: Evidence from U.S. Property–Liability Insurance Industry (September 2011). Journal of Risk and Insurance, Vol. 78, Issue 3, pp. 519-550, 2011, Available at SSRN: https://ssrn.com/abstract=1917908 or http://dx.doi.org/10.1111/j.1539-6975.2011.01410.x

Li‐Ying Huang (Contact Author)

affiliation not provided to SSRN

No Address Available

Gene C. Lai

affiliation not provided to SSRN

Michael J. McNamara

Washington State University - Department of Finance, Insurance and Real Estate ( email )

Todd 470
Pullman, WA 99164-4746
United States

Jennifer L. Wang

National Chengchi University - Department of Risk Management and Insurance ( email )

No. 64, Chih-Nan Road
Section 2
Wenshan, Taipei 11623
Taiwan

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