The Effect of Capital Structure on Financial Performance of Insurance Companies: Empirical Evidence from Private Insurance Companies in Ethiopia
| dc.contributor.advisor | Alem, Hagos (PhD) | |
| dc.contributor.author | Negussie, Mulugeta | |
| dc.date.accessioned | 2019-03-10T11:38:13Z | |
| dc.date.accessioned | 2023-11-04T07:57:22Z | |
| dc.date.available | 2019-03-10T11:38:13Z | |
| dc.date.available | 2023-11-04T07:57:22Z | |
| dc.date.issued | 2019-02 | |
| dc.description | A Thesis Submitted to the School of Graduate Studies of Addis Ababa University in Partial Fulfillment of the Requirements for the Degree of Masters of Science in Accounting and Finance. | en_US |
| dc.description.abstract | Capital structure decision related to a given business entity is at the center of many other decisions in the area of corporate finance. The main objective of this paper was to examine the effect of capital structure on financial performance of private insurance companies in Ethiopia. To realize this objective, the researcher applied quantitative research approach. The study employed a panel data and its regression analysis tools. The dataset comprised nine Ethiopian private insurance companies that were selected through purposive sampling technique. The data covered period of 10-years (2008-2017 G.C.). The data used in the study was secondary data which were firm level accounting data.The study investigated the effect of capital structure on financial performance proxied by return on Equity by using leverage ratio as variables of capital structure and five additional explanatory variables (degree of operating leverage, reinsurance dependence, company size, claim ratio, and premium growth) that can affect insurance companies’ financial performance. The data was analyzed through the help of Ordinary least square estimation method (panel least square regression analysis method). As panel data regression analysis tool, random effect model was used to analyze the panel data. The result of random effect regression model revealed that debt ratio,degree of operating leverage, company size and claim ratio have statistically significant effects on financial performance/profitability of private insurance companies of Ethiopia. Reinsurance dependence and premium growth have insignificant negative and positive effect on financial performance of private insurance companies of Ethiopia, respectively. Debt ratio, degree of operating leverage and company size have significant positive effects whereas claim ratio has significant negative effect on financial performance of private insurance companies of Ethiopia. Furthermore, all assumptions of classical linear regression model were not violated. Thus, the residuals were found homoscedastic, no autocorrelation, normally distributed and no multi-collinearity after two extreme negative values have been controlled through the use of two dummy variables. Based on the findings, the study recommends that the board and management of private insurance companies should give high attention to these variables by considering the way they underwrite both life and non-life insurance product by trying to minimize the influence of underwriting risk by adopting a risk management strategy and increase their net written premium. | en_US |
| dc.identifier.uri | http://etd.aau.edu.et/handle/123456789/16661 | |
| dc.language.iso | en_US | en_US |
| dc.publisher | Addis Ababa University | en_US |
| dc.subject | Capital Structure | en_US |
| dc.subject | Financial performance | en_US |
| dc.subject | Private insurance companies | en_US |
| dc.subject | Return on Equity | en_US |
| dc.title | The Effect of Capital Structure on Financial Performance of Insurance Companies: Empirical Evidence from Private Insurance Companies in Ethiopia | en_US |
| dc.type | Thesis | en_US |