Factors Affecting Profitability of Insurance Companies in Ethiopia
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Date
2019-06
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Addis Ababa University
Abstract
Insurance is one of the major risks mitigating mechanism in modern economy. The existence and survival of financially strong insurance companies is therefore inevitable. For insurers to be reliable and financially sound, their profitability and most importantly knowing what factors makes them profitable is very crucial objective. In order to achieve this objective, this study used quantitative research approach using Panel data covering ten-year period from 2009–2018 for nine insurance companies. The study used linear regression model to see the effect of independent variables, which were the factors under study, on dependent variable profitability peroxide by ROA. Data was analyzed with software Eviws8.The findings of the study showed that market share and managerial efficiency have statistically significant relationship with insurers’ profitability, and liquidity is positively less significant relationship with profitability. Whereas the Volume of capital, inflation and GDP are significantly negative with profitability and size, liquidity, leverage and growth rate are negative but insignificant relationship with profitability. The study provides evidence that company volume of capital, market share, managerial efficiency, and inflation and GDP are important factors affecting profitability of insurance companies in Ethiopia. Therefore, the study recommends that Ethiopian insurance companies should give due consideration to these factors to address profitability issues.
Description
A thesis submitted to the department of accounting and Finance in partial fulfillment for the requirements of the degree of Master of Science in Accounting and Finance
Keywords
Factors of profitability, Firm Specific and Macro-economic Factors, Linear regression model, Purposive sampling