Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

Measuring the Managerial Ability in the Insurance Companies in the Republic of North Macedonia, Croatia, Serbia, and Slovenia, and Identifying its Determinants


Affiliations
1 Ss. Cyril and Methodius University in Skopje, Blvd. Goce Delchev 9V, 1000 Skopje, Macedonia, the former Yugoslav Republic of
     

   Subscribe/Renew Journal


The aim of this paper is to measure the managerial ability of the insurance companies in the Republic of North Macedonia, Croatia, Serbia, and Slovenia, and to identify its determinants with the use of two-stage methodology (DEA + OLS). Our sample consists of 164 insurance-year observations and the covered period is 2016 to 2019. As insurance inputs, we use material costs, agent costs, labour costs, and capital costs, while insurance lines with similar characteristics such as personal short-tail lines, personal long-tail lines, commercial short-tail lines, and commercial long-tail lines are used as outputs. After obtaining the efficiency scores uing DEA, an OLS regression was conducted, where we find that the size, age, and personal longtail lines have a statistically significant and negative relationship with firm efficiency, while the financial leverage and personal short-tail lines show a positive and statistically significant relationship.s It has been found that size has a negative impact on the financial performance, while this association appeared positive for the capital ratio and insignificant for the managerial ability. The next OLS regression showed that CEO duality, board size, board composition, gender diversity, and CEO gender have an insignificant impact on the managerial ability, and the diversity of nationalities of the CEO revealed a positive and significant impact.

Keywords

Insurance, Relative Efficiency, Managerial Ability, DEA, OLS.
Subscription Login to verify subscription
User
Notifications
Font Size


  • Akhtar, M. H. (2018). Performance analysis of Takaful and conventional insurance companies in Saudi Arabia. Benchmarking: An International Journal, 25(2), 677-695.
  • Awan, S. H. (2012). Effect on board composition on firm performance: A case of Pakistan listed companies. Interdisciplinary Journal of Contemporary Research in Business, 3(10), 853-863.
  • Bacon, J. (1973). Corporate directorship practices: Membership and committees of the board. New York: The Conference Board.
  • Banker, R. D., Charnes, A., & Cooper, W. W. (1984). Some models for estimating technical and scale inefficiencies in data envelopment analysis. Management Science, 30(9), 1078-1092.
  • Banker, R. D., Cvetkoska, V., & Tripathi, M. K. (2021). Determinants of organizational ability in North Macedonian banking: Role of nationality and gender diversity in leadership. Paper Presented at the 37th International Conference of the French Finance Association (AFFI), 26-28 May.
  • Banker, R. D., & Tripathi, M. K. (2021). Measurement of organizational ability in the banking industry. Data Envelopment Analysis Journal, 5(1), 183-242.
  • Banker, R. D., & Natarajan, R. (2008). Evaluating contextual variables affecting productivity using 56(1), 48-58.
  • Barros, C. P., Nektarios, M., & Assaf, A. (2010). Efficiency in the Greek insurance industry. European Journal of Operational Research, 205(2), 431-436.
  • Barros, C. P., Dumbo, S., & Wanke, P. (2014). Efficiency determinants and capacity issues in Angolan insurance companies. South African Journal of Economics, 82(3), 455-467.
  • Biener, C., Eling, M., & Wirfs, J. H. (2016). The determinants of efficiency and productivity in the Swiss insurance industry. European Journal of Operational Research, 248(2), 703-714.
  • Chapple, L., & Humphrey, J. (2013). Does board gender diversity have a financial impact? Evidence using stock portfolio performance. Journal of Business Ethics, 122(4), 709-723.
  • Chen, C. W., Barry Lin, J., & Yi, B. (2008). CEO duality and firm performance-an endogenous issue. Corporate Ownership & Control, 6(1), 58-65.
  • Croatian Insurance Bureau – CIB. (2020). Insurance market in the Republic of Croatia – Key facts.
  • Cummins J. D., & Xie, X. (2016). Efficiency and productivity in the US Property-Liability insurance industry: Ownership structure, product and distribution strategies. J. Zhu (Eds.), Data Envelopment Analysis, International Series in Operations Research & Management Science, 238. Boston, MA: Springer.
  • Cummins, J. D., & Nini, G. P. (2002). Optimal capital utilization by financial firms: Evidence from the property-liability insurance industry. Journal of Financial Services Research, 21, 15-53.
  • Cummins, J. D., & Zi, H. M. (1998). Comparison of frontier efficiency methods: An application to the US life insurance industry. Journal of Productivity Analysis, 10(2), 131-152.
  • Demerjian, P. R., Lev, B. I., & McVay, S. E. (2012). Quantifying managerial ability: A new measure and validity tests. Management Science.
  • Doron, N. (2010). Analysis and valuation of insurance companies. CE|ASA (Center for Excellence in Accounting and Security Analysis) Industry Study (2).
  • Gockov, G., & Kamenjarska, T. (2021). Empirical analysis of the factors determining the profitability of insurance companies in the Republic of North Macedonia. Financial Studies, 25(1), 48-64.
  • Gordini, N., & Rancati, E. (2017). Gender diversity in the Italian boardroom and firm financial performance. Management Research Review, 40(1), 75-94.
  • Harris, M., & Raviv, A. (2008). A theory of board control and size. Review of Financial Studies, 21, 1797-1832.
  • Herman, E. S. (1981). Corporate control, corporate power. New York: Cambridge University Press.
  • Insurance Supervision Agency (ISA). Reports on business performance of the insurance undertakings.
  • Insurance Supervision Agency (ISA). Reports on the scope and content of the work of insurance agencies.
  • Isidro, H., & Sobral, M. (2014). The effects of women on corporate boards on firm value, financial performance, and ethical and social compliance. Journal of Business Ethics, 132(1), 1-19.
  • Isik, O., Unal, E. A., & Unal, Y. (2017). The effect of firm size on profitability: Evidence from Turkish manufacturing sector. Journal of Business, Economics and Finance (JBEF), 6(4), 301-308.
  • Jurčević, B., & Žaja, M. M. (2013). Banks and insurance companies’ efficiency indicators in the period of financial crisis: The case of the Republic of Croatia. Economic Research – Ekonomska Istraživanja, 26(1), 203-224.
  • Kamardin, H., & Haron, H. (2009). Roles of board of directors: Evidence from Malaysian listed companies. Corporate Board: Role, Duties and Composition, 5(1), 22-36.
  • Knezevic. S., Marković, M., & Brown, A. (2015). Measuring the efficiency of Serbian insurance companies. Acta Oeconomica, 65(1), 91-105.
  • KPMG. (2015). A new world of opportunity: The insurance innovation imperative.
  • KPMG. (2020). Importance and key benefits of life insurance and private pensions.
  • Law on Compulsory Traffic Insurance in the Republic of North Macedonia. (2008).
  • Lazzaretti, K., Kleinübing, G. C., Parodi, O. C. S., & Marcon, R. (2013). Gender diversity in the boards of directors of Brazilian businesses. Gender in Management: An International Journal, 28(2), 94-110.
  • Liu, Y., Wei, Z., & Xie, F. (2013). Do women directors improve firm performance in China? Journal of Corporate Finance, 28, 169-184.
  • Low, D., Roberts, H., & Whiting, R. (2015). Board gender diversity and firm performance: Empirical and Singapore. Pacific-Basin Finance Journal, 35, 381-401.
  • Lückerath-Rovers, M. (2013). Women on boards and firm performance. Journal of Management and Governance, 17(2), 491-509.
  • Medved, D., & Kavčič, S. (2012). An empirical study of efficiency in Croatia and Slovenia in insurance markets. Economic Research, 25(1), 105-120.
  • Micajkova, V. (2015). Efficiency of Macedonian insurance companies: A DEA approach. Journal of Investment and Management, 4(2), 61-67.
  • National Bank of Serbia. (2020). Regular reports of insurance undertakings.
  • National Insurance Bureau – NIB. (2020). Insurance bulletin.
  • Nourani, M., Devadason, E. S., Kweh, Q. L., & Lu, W. M. (2016). Business excellence: The managerial and value-creation efficiencies of the insurance companies. Total Quality Management & Business Excellence, 28(7-8), 879-896.
  • Rodrigues, D. S. I. F. (2014). Nationality diversity on board of directors and its impact on firm performance (Master thesis). Finance at Tilburg University.
  • Singh, M., & Davidson, W. N. (2003). Agency costs, ownership structure and corporate governance mechanisms. Journal of Banking & Finance, 27(5), 793-816.
  • Singh, V., & Vinnicombe, S. (2004). Why so few women directors in top UK boardrooms? Evidence and theoretical explanations. Corporate Governance: An International Review, 12(4), 479-488.
  • Slovenian Insurance Association – SIA. (2020). Statistical insurance bulletin.
  • Torchia, M., Calabrò, A., & Morner, M. (2015). Board of directors’ diversity, creativity, and cognitive conflict: The role of board members’ interaction. International Studies of Management and Organization, 45(1), 6-24.
  • Valenti, A., Luce, R., & Mayfield, C. (2011). The effects of firm performance on corporate governance. Management Research Review, 34(3), 266-283.
  • Yuengert, A. M. (1993). The measurement of efficiency in life insurance: Estimates of a mixed normal-gamma error model. Journal of Banking & Finance, 17(2-3), 483-496.

Abstract Views: 33

PDF Views: 0




  • Measuring the Managerial Ability in the Insurance Companies in the Republic of North Macedonia, Croatia, Serbia, and Slovenia, and Identifying its Determinants

Abstract Views: 33  |  PDF Views: 0

Authors

Violeta Cvetkoska
Ss. Cyril and Methodius University in Skopje, Blvd. Goce Delchev 9V, 1000 Skopje, Macedonia, the former Yugoslav Republic of
Ljupcho Eftimov
Ss. Cyril and Methodius University in Skopje, Blvd. Goce Delchev 9V, 1000 Skopje, Macedonia, the former Yugoslav Republic of
Igor Ivanovski
Ss. Cyril and Methodius University in Skopje, Blvd. Goce Delchev 9V, 1000 Skopje, Macedonia, the former Yugoslav Republic of
Tanja Kamenjarska
Ss. Cyril and Methodius University in Skopje, Blvd. Goce Delchev 9V, 1000 Skopje, Macedonia, the former Yugoslav Republic of

Abstract


The aim of this paper is to measure the managerial ability of the insurance companies in the Republic of North Macedonia, Croatia, Serbia, and Slovenia, and to identify its determinants with the use of two-stage methodology (DEA + OLS). Our sample consists of 164 insurance-year observations and the covered period is 2016 to 2019. As insurance inputs, we use material costs, agent costs, labour costs, and capital costs, while insurance lines with similar characteristics such as personal short-tail lines, personal long-tail lines, commercial short-tail lines, and commercial long-tail lines are used as outputs. After obtaining the efficiency scores uing DEA, an OLS regression was conducted, where we find that the size, age, and personal longtail lines have a statistically significant and negative relationship with firm efficiency, while the financial leverage and personal short-tail lines show a positive and statistically significant relationship.s It has been found that size has a negative impact on the financial performance, while this association appeared positive for the capital ratio and insignificant for the managerial ability. The next OLS regression showed that CEO duality, board size, board composition, gender diversity, and CEO gender have an insignificant impact on the managerial ability, and the diversity of nationalities of the CEO revealed a positive and significant impact.

Keywords


Insurance, Relative Efficiency, Managerial Ability, DEA, OLS.

References