Capital Market Development, Competition, Property Rights, and the Value of Insurer Product‐Line Diversification: A Cross‐Country Analysis

37 Pages Posted: 22 May 2013

See all articles by Thomas Berry-Stölzle

Thomas Berry-Stölzle

University of Iowa - Department of Finance

Robert E. Hoyt

University of Georgia - C. Herman and Mary Virginia Terry College of Business

Sabine Wende

University of Cologne - Faculty of Management, Economics and Social Sciences

Date Written: June 2013

Abstract

In this article, we show that the effect of product diversification on performance is not homogeneous across countries. Diversified insurance companies perform significantly worse than their focused competitors in countries with well‐developed capital markets, high levels of property rights protection, and high levels of competition. In addition, we find that the diversification–performance relationship for insurance companies depends on company size. For large insurers operating in countries with less developed capital markets, diversification significantly increases performance. Our results suggest that the optimal organizational structure may be different for insurers operating in emerging economies than for insurers operating in developed countries.

Suggested Citation

Berry-Stölzle, Thomas and Hoyt, Robert E. and Wende, Sabine, Capital Market Development, Competition, Property Rights, and the Value of Insurer Product‐Line Diversification: A Cross‐Country Analysis (June 2013). Journal of Risk and Insurance, Vol. 80, Issue 2, pp. 423-459, 2013. Available at SSRN: https://ssrn.com/abstract=2268307 or http://dx.doi.org/10.1111/j.1539-6975.2012.01470.x

Thomas Berry-Stölzle (Contact Author)

University of Iowa - Department of Finance ( email )

Iowa City, IA 52242-1000
United States

Robert E. Hoyt

University of Georgia - C. Herman and Mary Virginia Terry College of Business ( email )

Athens, GA 30602-6255
United States
706-542-4290 (Phone)
706-542-4295 (Fax)

Sabine Wende

University of Cologne - Faculty of Management, Economics and Social Sciences ( email )

Albertus-Magnus-Platz
Cologne, D-50923
Germany

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