Profitability Determinants in the Insurance Sector in Ethiopia: A Panel Evidence on Non-Life Insurance
No Thumbnail Available
Date
2017-11
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
This study intends to investigate the determinants of profitability in the insurance sector in
Ethiopia with reference to general (non-life) insurance companies on basis of data covers
six years (2011-2016) period. The study selected sample of twelve (12) insurance
companies to study them for a period of six years (2011-2016) with total of 72 observations
through panel data. Accordingly, the study used documentary analysis of companies’
audited financial statements of general insurers which obtained from NBE and head office
of each insurance companies. The key explanatory variables were selected to disclose their
relationship and influence on profitability measured by return on asset (ROA) from the
prominent previous studies. The CLRM assumptions needed to be fulfilled for OLS that
were tested and the residual was found to be homoscedastic, free of Multicollinearity, free
of autocorrelation and normally distributed. The results of panel least square regression
analysis indicate that industry concentration ratio and leverage, have statistically
significant and positive relationship with Non-life insurance business profitability. On the
other hand, diversification, underwriting risk and reinsurance dependence has a negative
and statistically significant relationship with general insurance companies’ profitability.
Based on this finding, the study suggests that, the management bodies of the insurance
companies should give high attention on firm and industry related variables, particularly
by adopting better risk management strategies and better internal control to achieve
superior profitability.
Keywords: Insurance, Profitability, Firm specific, Macroeconomic, Ethiopia
Description
Keywords
Insurance; Profitability; firm specific; macroeconomic; ethiopia