Factors Affecting Profitability of Insurance Companies in Ethiopia: Panel Evidence
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Date
2012-06
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A.A.U
Abstract
Profitability is one of the most important objectives of financial management because one
goal a/financial management is to maximize the owner's wealth. This paper examined
the effects of firm specific factors (age of company, size of company, volume of capital,
leverage ratio, liquidity ratio, growth and tangibility of assets) on profitability peroxide by
ROA. Profitability is dependent variable while age of company, size of company, volume
of capital, leverage liquidity ratio, growth and tangibility of asset~) are independent
variables. The sample in this study includes nine of the listed insurance companies for
nine years (2003-2011). Secondary data obtained from the financial statements (Balance
sheet and Profit/Loss account) of insurance companies, financial publications of NBE are
analyzed. From the regression results; growth, leverage, volume of capital, size, and
liquidity are identified as most important determinant factors of profitability hence
growth, size, and volume of capita are positively related. In contrast, liquidity ratio and
leverage ratio are negatively but significantly related with profitability. Lastly, age of
company and tangibility of assets are not significantly related with profitability.
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Keywords
Affecting Profitability of Insurance, Companies in Ethiopia