The effect of organizational structure on efficiency: Evidence from the Spanish insurance industry

This paper provides new information on the effects of organizational structure on efficiency by analyzing Spanish stock and mutual insurers over the period 1989-1997. We test the efficient structure hypothesis, which predicts that the market will sort organizational forms into market segments where they have comparative advantages, and the expense preference hypothesis, which predicts that mutuals will be less efficient than stocks. Technical, cost, and revenue frontiers are estimated using data envelopment analysis. The results indicate that stocks and mutuals are operating on separate production, cost, and revenue frontiers and thus represent distinct technologies. In cost and revenue efficiency, stocks of all sizes dominate mutuals in the production of stock output vectors, and smaller mutuals dominate stocks in the production of mutual output vectors. Larger mutuals are neither dominated by nor dominant over stocks in the cost and revenue comparisons. Thus, large mutuals appear to be vulnerable to competition from stock insurers in Spain. Overall, the results are consistent with the efficient structure hypothesis but are generally not consistent with the expense preference hypothesis. © 2004 Elsevier B.V. All rights reserved

The economic crisis and efficiency change: Evidence from the Korean construction industry

This article gauges and analyses different types of efficiency in the Korean construction industry for the period 1996 to 2000, which includes the country's economic crisis. We also identify several important factors of the efficiency change and provide some managerial implications for the reason why most Korean construction firms had failed to maintain or enhance efficiency during this period. The results show that efficiency measures decreased significantly during the sample period and that there are large differences over the period before and after the economic crisis. Unlike many other industries, the low level of cost efficiency of the construction industry is mainly due to allocative inefficiency (inappropriate mix of input factors) rather than technical inefficiency. The low level of allocative efficiency, together with the strong relationship between institutional investors and efficiency, implies that the agency problem between managers and owners had prevailed in the Korean construction industry, and that construction firms could increase efficiency by minimizing agency costs. The study also implies that firms having failed in decreasing the leverage ratio, disposing unproductive assets and increasing the receivables overdue turnover could not avoid the efficiency decrease