Product Diversification as a Performance Boosting Strategy? Drivers and Impact of Diversification Strategies in the Property-Liability Insurance Industry

Duijm, Patty; Beveren, Ilke Van

doi:10.2139/ssrn.3576593

Cited by 1 publication

(4 citation statements)

References 21 publications

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“…As partially mentioned above, in spite of the potential benefits, diversification strategy may be associated with considerable costs as well (Duijm and van Beveren 2020, Lee 2017, Benito Osorio et al 2012, Zhou 2011. Acquiring new technologies, buying new offices, hiring new staff, more emphasis on R&D, coordination between different lines of business, and adding a new production line to the current business, are unattainable without extensive expenditures.…”

Section: Firmmentioning

confidence: 99%

“…Moreover, Cahyo et al (2021), by studying 127 Indonesian Stock Exchange listed firms, confirmed there is no relationship between product diversification and ROE. According to this point of view, as diversification strategy entails huge costs for firms (Duijm and van Beveren 2020, Lee 2017, Benito Osorio et al 2012, Zhou 2011, it is not the best strategic option for them, particularly if they do not possess sufficient financial resources.…”

Section: Diversification Strategy Has No Significant Impact On Firms'...mentioning

confidence: 99%

“…According to the Modern portfolio theory (MPT), insurance companies benefit financially from a diversified portfolio of risks or insurance products (Alzobi 2020, Lee 2020, Duijm andBeveren 2020, andDong andWong 2000). Other scholars have also reported a positive relationship between product diversification and firms' financial performance in the insurance context, in different territories (Ortynski 2019, Peng et al 2017, Krivokapic et al 2017, Cole and Karl 2016, Shi et al 2016.…”

Section: The Relationship Between Product Diversification and Firms' ...mentioning

confidence: 99%

“…Sixth, this thesis develops the measurement method of product diversification specifically for insurance firms. While previous studies in the insurance context mostly used the number of business lines or premiums collected to measure product diversification (Peng and Lian 2020, Lee 2020, Duijm and Beveren 2020, Krivokapic et al 2017, Peng et al 2017, Shim 2011, Liebenberg and Sommer 2008, this thesis adds a new measure to the literature (number of insurance policies underwritten in each line of business) for investigating product diversification of insurance firms.…”

Section: Literaturementioning

confidence: 99%

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The impacts of diversification strategy on the financial performance of insurers

Shojaei¹

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The thesis examines the impacts of diversification strategy on the financial performance of firms in the insurance industry. It investigates the impacts of different dimensions of the diversification strategy, including product, geographic, staff, and technological diversification, on insurers' financial performance while considering some essential control variables such as type, size, age, and ownership structure of the companies. The research measures financial performance with the return on equity (ROE) and the return on assets (ROA). The thesis employs the mixed methods research methodology using qualitative and quantitative data collected from Iranian insurance companies, while the data is analysed quantitatively. Two separate studies are conducted to evaluate the impacts of different dimensions of diversification strategy on firms' financial performance. Specifically, the first study focuses on the impact of technological diversification strategy on a firm's financial performance. This study uses the primary data associated with technological diversification through a questionnaire survey with managers from 31 Iranian insurance companies, as the data for technological diversification is not available as secondary data. The data associated with firms' financial performance is collected from reports annually published by the Central Insurance of Iran. Employing the Structural Equation Modelling method enabled by Smart PLS 3 software to analyse the primary data, the study reports mixed effects of technological diversification on the financial performance of Iranian insurers. The second study focuses on investigating the impacts of product, geographic and staff diversification strategies on the financial performance of Iranian insurers. This study employs secondary data collected from the annual reports of the Central Insurance of Iran (from 2011 to 2020). Using econometric techniques for panel data (e.g., fixed effects) enabled by EViews 10 software, the study finds some 3 significant impacts of different dimensions of diversification strategy on the financial performance of Iranian insurers. This thesis is novel in several ways. First, it uses new measurement methods for different dimensions of the diversification strategy, specifically for product diversification and technological diversification. Second, this is the first study in diversification-firms' financial performance literature that combines all four dimensions in a single study. Third, this research benefits from different theoretical perspectives to synthesise the literature and interpret the findings. Therefore, the thesis is not bound or biased to any single theoretical lens. Finally, it provides robust and comprehensive findings for both researchers and practitioners in the insurance industry.

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Section: Firmmentioning

confidence: 99%

Section: Diversification Strategy Has No Significant Impact On Firms'...mentioning

confidence: 99%

Section: The Relationship Between Product Diversification and Firms' ...mentioning

confidence: 99%

Section: Literaturementioning

confidence: 99%

See 2 more Smart Citations

The impacts of diversification strategy on the financial performance of insurers

Shojaei¹

View full text Add to dashboard Cite

show abstract

Product Diversification as a Performance Boosting Strategy? Drivers and Impact of Diversification Strategies in the Property-Liability Insurance Industry

Cited by 1 publication

References 21 publications

The impacts of diversification strategy on the financial performance of insurers

The impacts of diversification strategy on the financial performance of insurers

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