The Effect of Market Structure on Private Non-life Insurances’ Profitability in Ethiopia
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Date
2019-02
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Addis Ababa University
Abstract
The main objective of this study is to examine the effect of market structure on private
non-life insurances profitability in Ethiopia. The research used Relative Market Power
(RMP), Structure-Conduct-Performance (SCP) and Efficiency Structure hypothesis
(ESH) theory to investigate the effect of market structure on profitability of non-life
insurances in Ethiopia. The study used panel data of nine Sample non-life insurances that
have commenced their operation before eleven years that covers (2009-2017) period. The
data used in this study are secondary that was collected from national bank of Ethiopia
and respective non-life insurance companies. In line with the objectives, the study
adopted a quantitative method of research approaches to test the hypothesis. The
dependent variable profitability was measured using return on asset. The explanatory
variables include; market share, concentration and efficiency as well as liquidity and
leverage as control variables. The study used OLS to estimate the multiple regression
model constructed through E-views 8 software after it made sure it satisfy the basic
diagnostic tests. The result indicates market share, efficiency, and liquidity had a positive
and statistically significant effect on private non-life insurances profitability in Ethiopia.
On the contrary, leverage was negative and statistically significant on private non-life
insurances profitability in Ethiopian. Market concentration has a negative, but
insignificant relation with profitability of non-life insurance during the study period.
Based on the above findings, the study suggests private non-life insurance company
managers should emphasize to increase their market share maximization strategy,
progressively become efficient internally and hold the adequate liquid asset to meet their
obligations.
Description
A thesis submitted to the Department of Accounting and Finance for
the Partial fulfillment of the degree of Master of Science in
Accounting and Finance.
Keywords
Efficiency and panel data, Mmarket structure, Non-life insurance, Return on asset