The Determinants of Insurance Companies’ Profitability in Ethiopia
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Date
2019-02
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Addis Ababa University
Abstract
The profitability of insurance companies has been the focus of several studies in emerging economies across the world. However, when it comes to Ethiopia it received little attention. Therefore, the researcher conduct this study entitled “The Determinants of Insurance Companies Profitability in Ethiopian”. The major objective of this study was to investigate the most important determinant of profitability in the insurance sector of Ethiopia by using regression analysis. This study was based on entirely secondary data collected from NBE and MOFEC. This study covers the time period from 2003 – 2017 in order to increase numbers of observations. In addition, this study used Explanatory research design to check cause and effect relationship between dependent variable and independent variables besides, fixed effect model was used. Under this study, both internal and external factors were included. Internal factors used in this study include (company age, leverage, liquidity, premium growth, underwriting risk and tangibility of asset) whereas, the external factor are market share, economic growth and inflation. Moreover, ROA and ROE were used to measure Profitability. The regression result reveals that company age, market share and GDP have significant impact on the profitability of Ethiopian insurance companies measured by both return on asset and return on equity in addition to those three variables premium growth also have positive significant effect on profitability of Ethiopian insurance companies peroxide by return on asset. While other variables included in the research have insignificant effect on profitability of Ethiopian insurance companies measured by both models. Finally, the study suggests the mangers of Ethiopian insurance companies to prepare themselves for macroeconomic changes by preparing financial plans and to provide new product lines and making extensive advertisement that maximizes their market share.
Description
A Thesis Submitted to the Department of Accounting and Finance, College of Business and Economics, Addis Ababa University, in Partial Fulfillment of the Requirements for Degree of Master of Accounting and Finance
Keywords
Market Share, Profitability, Return on Asset, Return on Equity