Risk Management and Financial Performance in the Insurance Business: The Case of Ethiopian Insurance Corporation
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Date
2019-06
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Addis Ababa University
Abstract
The study focuses on the analysis of risk management factors that affect the financial performance of Ethiopian Insurance Corporation. Managing risks are an important factor which the corporation must attend to achieve its financial performance. From this perspective, risk management becomes one of the most important practices to be used in corporation in order to get higher returns. Therefore, this study attempted to ascertain the relationship between risk management and financial performance of E I C. In order to achieve this objective, the study used explanatory research design, quantitative research approach and time series data covering twenty three-years (1996–2018). The study used panel data techniques specifically fixed effect model on the regression analysis and used E-view9 software. The study used one dependent variable, return on asset (ROA), five independent variables that are liquidity risk, solvency risk, technical reserve risk, underwriting risk and reinsurance risk. The results of the fixed effect regression model revealed that technical reserve and liquidity risks have negative & insignificant impact on ROA (proxy measure for financial performance) of the corporation, whereas solvency risk, underwriting risk and reinsurance risk have positive & significant effect at 1% significance level on ROA of the corporation. The study led to the conclusion that technical reserve, liquidity risk, solvency risk, underwriting risk and reinsurance risks are the factors for the financial performance of the corporation. On the basis of these findings, the study recommends that the corporation needs of attention for mentioned risks.
Description
A thesis submitted to the department of Accounting and Finance in Partial Fulfillment of the Requirements for the Degree of Master of Science in Accounting and Finance
Keywords
Financial performance, Risk management