The efficiency performance of the insurance companies in Malaysia and risk management committee's characteristics and prestige/ Kweh Qian Long

Faculty of Industrial Management

Thesis (Doctor of Philosophy in Technology Management) -- Universiti Malaysia Pahang – 2015

Bibliography : p. 117-133

The first objective of this thesis is to evaluate the corporate performance of insurance companies in Malaysia from a multi-dimensional perspective. A dynamic data envelopment analysis (DEA) model with a network structure is used to examine the resource-management efficiency, the profitability efficiency, and the overall efficiency of 16 local insurers and 14 foreign insurers in Malaysia for the period 2008-2013. This thesis finds that inefficient insurers in Malaysia have approximately 28.2 per cent of room for improvement, which is mainly caused by their inefficiency in the profitability efficiency. The comparisons between local and foreign insurers on efficiency performance show that foreign insurers incorporated in Malaysia are more efficient than local insurers by virtue of the strong backup from their parent companies. The second aim of this thesis is to test the main effects of risk management committee’s characteristics and prestige on efficiency performance. Through truncated regression with a bootstrapping approach, this thesis indicates that risk management committee’s characteristics and prestige are significantly and positively related to efficiency performance. The third objective of this thesis is to investigate the potential interaction between risk management committee’s characteristics and its prestige. The regression analysis documents that risk management committee’s prestige negatively moderate the relationship between risk management committee’s characteristics and efficiency performance, in support of political theory. After controlling for board characteristics and firm-specific characteristics, these regression results are robust to several sensitivity analysis such as (i) using the three measures of efficiency performance, (ii) applying various regression methodologies, and (iii) using a composite variable and a dummy variable for risk management committee’s characteristics and prestige, respectively. Finally, this thesis classifies the sample insurers using cluster analysis and multidimendional scaling, and develops a decision-making matrix to provide some recommendations for managers in improving their risk management and efficiency performance. Overall, contributions of this thesis are not only in the issue and methodology, but also in the insight in that it might provide to policy makers regarding the importance of risk management committee, and particularly risk management committee’s characteristics, including size, independence, and meeting, and its prestige in preventing another catastrophic global financial crisis.