Diversification Strategy and Comparative Financial Performance in the Chinese Non-life Insurance Industry

Abstract

This dissertation investigates the impacts of a firm’s diversification strategy and firm-specific factors on the financial performance in the Chinese non-life insurance industry using data from 2003 to 2007. The return on assets and risk-adjusted return on assets are chosen as the proxies of a firm’s financial performance. With the separation of product and geographic diversification, as measured by a modified Herfindahl index of gross written premiums, the results from both the panel data analysis and the cross-sectional data analysis indicate that large firms or firms with a high degree of product diversification outperform the others. In addition, the inconclusive results from the impacts of the group status, ownership structures and other firm-specific factors may suggest a complex relationship between the factors and a firm’s financial performance, which is unique for the characteristics in the Chinese non-life insurance industry