Corporate governance mechanism and performance of insurers in Pakistan

Muhammad Junaid; Ye Xue; Muzzammil Wasim Syed; Muhammad Ziaullah; Numair Riffat; Muhammad Junaid; Ye Xue; Muzzammil Wasim Syed; Muhammad Ziaullah; Numair Riffat

doi:10.3934/GF.2020014

Green Finance

2020, Volume 2, Issue 3: 243-262. doi: 10.3934/GF.2020014

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Research article

Corporate governance mechanism and performance of insurers in Pakistan

1.
School of Economics and Management, Taiyuan University of Technology, Taiyuan 030024, China
2.
Faculty of Management Sciences, ILMA University, Karachi 75190, Pakistan
3.
Department of Business Administration, Ghazi University, Dera Ghazi Khan 32200, Pakistan
4.
Department of Management Sciences, National University of Modern Languages (NUML) 44000, Pakistan

Received: 01 June 2020 Accepted: 02 July 2020 Published: 07 July 2020
JEL Codes: G22, G30, M12

This paper aims at investigating the relationship between corporate governance mechanisms (CGM) and the performance of insurers in Pakistan. Major corporate governance theories such as agency theory, resource dependence theory, and stewardship theory are used to address governance mechanisms. Data of listed insurers on the Pakistan Stock Exchange (PSX) was collected from annual reports for a period of 12 years from 2007–2018. Pooled OLS is used for analysis purpose, and findings indicate that board composition, ownership concentration, and executive compensation are the most influential internal CGM for the insurers' performance. Board composition and executive compensation are significantly negatively related to all performance measures, but ownership concentration significantly positively impact the performance of insurers in Pakistan. Control variables size and age positively impacts all performance measures while leverage negatively impacts all performance measures. In sum, the regression results of this study indicate that CGM has significant effects on the insurer's performance in Pakistan.
- CEO compensation,
- corporate governance,
- board structure,
- firm performance,
- ownership concentration
Citation: Muhammad Junaid, Ye Xue, Muzzammil Wasim Syed, Muhammad Ziaullah, Numair Riffat. Corporate governance mechanism and performance of insurers in Pakistan[J]. Green Finance, 2020, 2(3): 243-262. doi: 10.3934/GF.2020014

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Abstract

This paper aims at investigating the relationship between corporate governance mechanisms (CGM) and the performance of insurers in Pakistan. Major corporate governance theories such as agency theory, resource dependence theory, and stewardship theory are used to address governance mechanisms. Data of listed insurers on the Pakistan Stock Exchange (PSX) was collected from annual reports for a period of 12 years from 2007–2018. Pooled OLS is used for analysis purpose, and findings indicate that board composition, ownership concentration, and executive compensation are the most influential internal CGM for the insurers' performance. Board composition and executive compensation are significantly negatively related to all performance measures, but ownership concentration significantly positively impact the performance of insurers in Pakistan. Control variables size and age positively impacts all performance measures while leverage negatively impacts all performance measures. In sum, the regression results of this study indicate that CGM has significant effects on the insurer's performance in Pakistan.

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