A decomposition analysis of managerial efficiency for the insurance companies: A data envelopment analysis approach

• Main Authors: Nourani, Mohammad, Kweh, Qian Long, Devadason, Evelyn Shyamala, Chandran, V.G.R.
• Format: Article
• Published: Wiley 2020
• Subjects: HG Finance
• Online Access: http://eprints.um.edu.my/25514/; https://doi.org/10.1002/mde.3145

The insurance industry worldwide has become less fragmented through liberalization reforms. Yet, following the transformational changes, there is little empirical evidence on identifying the determinants of managerial efficiency. This paper employs a truncated regression analysis to determine the factors driving managerial efficiency of Malaysian insurers. Overall and divisional efficiencies are derived using data envelopment analysis. The decomposition analysis reveals that the observed inefficiency is mainly caused by investment capability division. The regression findings reveal that determinants of efficiency have dissimilar impacts on overall and divisional efficiencies. This study broadly supports financial liberalization as a means of promoting managerial efficiency. © 2020 John Wiley & Sons, Ltd.