The Effect of Firm Specific Risk on Performance of Insurance Companies in Ethiopia
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Date
2019-01
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Addis Ababa University
Abstract
The purpose of this study is to investigate the impact of financial risk on performance of
insurance company’s in Ethiopia. Which examined the effects of firm specific financial risk factors
(liquidity risk , credit risk, solvency risk, technical provisions risk, claim settlement risk, reinsurance
risk, Underwriting risk and size of the company) on performance proxy by Return on Assets.
performance is dependent variable while liquidity risk , credit risk, solvency risk, technical
provisions risk, claim settlement risk, reinsurance risk, Underwriting risk and size of the company
are independent variables. The sample in this study includes eight insurance companies that operates
in Ethiopia for ten(10) financial years (2008-2017).Secondary data obtains from the financial
statements (Balance sheet and Profit/Loss account) of insurance companies, financial publications
of National Bank of Ethiopia are analyzed. In this study to analyze the collected data; descriptive,
correlation and multiple panel linear regression data analysis method has been employed. The
results of the random effect regression model revealed that credit risk, liquidity risk and claim
settlement risk have negative & significant impact on ROA (proxy measure for financial performance)
of insurance company in Ethiopia, whereas company size and reinsurance risk have positive &
significant effect on ROA. The study leads to the conclusion that credit risk, liquidity risk, claim
settlement risk, reinsurance risk and size of a company are the pull factors for the financial
performance of insurers.
In general, this study will be significant to insurance companies, general public, students and the
insurance regulators as it will offer valuable contributions from both a theoretical and practical
perspective.
Description
A thesis submitted to Addis Ababa University College of
Business and economics department of accounting and
Finance in partial fulfillment of the requirements for
Degree of masters of Science in accounting and finance
Keywords
Insurance Companies, Risk on performance