Assessment of Individual Investors’ Preference to Invest on the Shares of Ethiopian Insurance Share Companies; After IPO
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Date
2015-11
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Addis Ababa University
Abstract
A number of studies have been undertaken to identify the factors influencing individual investor’s decision
preference to invest in stock markets by considering specific factors of both financial and non-financial like
social factor, cultural factors, psychological perception and others. This study aimed to investigate the
determinant factors that influence individual investors’ preference to invest on the shares of Ethiopian
private insurance share companies. In Ethiopia t he number of private insurance companies is
increasing from 8, in 2005, to 16 in 2015 which holds around 72 % of the market share of the
insurance industry. The study deployed both primary and secondary data, the purpose of the
secondary data is to supplement findings of the primary data. The primary data is about financial,
social, cultural and psychological perception of individual shareholders which was obtained and
analyzed through questionnaire from insurance companies shareholders and the secondary
financial panel data covers the period from 2003 to 2014 pertaining to eight (8) Ethiopian insurance
share companies about the profitability, leverage, firm size, general inflation of Ethiopia and one
year lagged value of earning per share as possible determinant factors of individual investors’
preference which is proxied by earning per share. The empirical results of both the primary data
and the regression output of the secondary data revealed that financial, social, cultural and
psychological factors have an impact on the investment decision preference of the individual
investors. Accordingly investors recommended to look at insurance companies choices relative to
comparable companies based on multiple factors of both financial and non-financial factors related
to social, cultural, psychological, profitability, firm size with regard to total asset and other
historical financial performances. In addition insurance companies should enlighten investors on
the factors that are necessary to maximize their wealth in the capital market that will affect
investors’ investment decision.
Key words: Insurance shareholders, investors’ preference, non- financial factors
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Keywords
Insurance shareholders, Investors’ preference, Non- financial factors