Corporate governance in insurance sector Chaudhary Priyanka Assistant Professor, Delhi School of Management, Delhi Technological University, Bawana Road, Delhi, India Online published on 5 June, 2014. Abstract Currently, the way in which companies are managed and controlled in India is intensely being scrutinized consequently pushing the subject of corporate governance to the top of the agenda. The focus on corporate governance is particularly crucial in financial services and, most of all, in the insurance sector since this sector has lately become highly exposed to public scrutiny and has learned, in a costly manner, the risk of attracting adverse publicity through failings in governance and stakeholder relationships. The importance of responsibility, accountability, transparency and fairness are raising the issues of their effect on the performance of the firm and the managers as well. This is closely related to the agency problem because corporate governance mechanisms intend to induce managers to act according to the best interest of the shareholders, which is by maximizing the firm's value and ultimately reducing agency costs. This study is a contribution to other studies conducted to examine the impact of corporate governance mechanisms on firm's performance of the insurance industry in India, understand how to minimize the agency costs effectively and design the appropriate organizational structure. Also, to distinguish between good and bad corporate governance which is a crucial step in building the market's confidence and attracting positive investment flows to the institution and the economy. The researcher suggests that every insurance firm should properly define corporate governance and its mechanisms and implement them effectively in order to reach the firm's long-term goals, build stakeholders’ confidence and generate positive investment flows.The recent financial crisis has had enormous impacts on the economy, leading to major problems in insurance companies. Therefore, an insurance company should focus on good corporate governance that will build a stable foundation for recovering from this crisis. Top Keywords Corporate governance, firms performance, insurance sector. Top |