Journal of Accounting, Finance & Management Strategy







Volume 16, Number 2, December 2021

The Effects of Income Diversification and Financial Policy Uncertainty on Risk-Taking in China's Insurance Industry: Comparison of Policy Effects


China implemented the Outline Thirteenth Five-Year Plan for the Development of China's Insurance Industry in 2016, aiming to accelerate the development of modern insurance service industry and diversify the allocation of insurance funds. This research objects of this study are 4 insurance companies listed in China's A-share market in 2011, and the research period is from 2011 to 2019. This study uses multiple regression and seemly unrelated regression to explore the impact of income diversification and economic policy uncertainty (EPU) index on insurance companies' risk-taking, and further compares whether there are significant differences after the 2016 policy is promulgated. The verification of the Wilcoxon signed-rank test shows that the diversification of income of the insurance companies has increased significantly and the economic policy uncertainty index has decreased significantly, after the announcement of the policy in 2016. The verification of the multiple regression shows that after the announcement of the policy in 2016, the diversification of income of insurance companies is significantly positively correlated with operating risk, and the diversification of income of insurance companies is significantly negatively correlated with the risk of bankruptcy (Z-index), that is, as the company with the increase in the diversification of income, the company’s operating risks also increase. The analysis results of seemly unrelated regression show that it is basically the same with multiple regression. After the policy announcement, the only difference is that the company's size is positively correlated with the bankruptcy risk (Z-index). The larger the company, the lower the risk of company bankruptcy.

Keywords: Income Diversification, Operating Performance, Risk-Taking, Financial Reform Policy, Economic Policy Uncertainty (EPU)

JEL Classification: M14, M31, N15