The Effect of Financial Risk on Performance of Private Insurance Companies in Ethiopia
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Date
2020-11
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A.A.U
Abstract
The insurance companies are exposed to various risks which originated from both the internal
and external environment. Hence, the effect of financial risk has been considered to be an
important issue on the performance of insurance companies. Therefore this study tried to
examine the relationship between financial risk and financial performance of insurers in
Ethiopia. In order to achieve this objective, the researcher used explanatory research design and
quantitative research approach. Also the secondary Panel data covering eight (8) private
insurance companies in Ethiopia for twelve (12) consecutive years (2007–2018) were analyzed
by using STATA software. The study tried to examine the relationship between independent
variables credit risk, liquidity risk, solvency risk, technical provision risk, reinsurance risk,
underwriting risk, firm size and dependent variable ROA. The regression result showed that
credit risk, solvency risk, and technical provisions risk have negative and significant effect at 1%
and 5% significance level on performance of private insurance companies in Ethiopia, whereas
Liquidity risk, reinsurance risk and firm size have positive and significant effect on ROA. The
researcher concluded that financial risk has significant effect on the performance of Ethiopian
insurance companies. On the basis of the findings, the study recommended that there is greater
need for Ethiopia insurers to give due attention the financial risks particularly credit risk,
liquidity risk, solvency risk, technical provision risk, reinsurance risk and firm size more
integrally and to increase their size by enhancing their assets base.
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 Science
Accounting And Finance
Keywords
Financial performance, Financial risk, Insurance