Capital, risk and efficiency in the Malaysian insurance sector: The moderating role of corporate governance

Abstract

This study devotes attention to an often neglected issue, the agency problem, as far as the simultaneous equations model of capital, risk and efficiency is concerned. Encapsulating by the agency theory specifically, it can be inferred that corporate governance mechanisms have the potential to align the different interests between managers and owners. There is, therefore a strong interest into the substance of corporate governance which becomes particularly important in the debate about whether the relationships among capital, risk and efficiency are attributable to the strength of corporate governance. Combining insights from the areas of research involving the nexus of capital, risk and efficiency, and corporate governance, this is a more comprehensive study that explicitly accounts for the proactive role played by shareholders through corporate governance in influencing decisions on capital, risk and efficiency