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Journal ArticleDOI

Firm specific factors that determine insurance companies’ performance in ethiopia

30 Apr 2013-European Scientific Journal, ESJ (European Scientific Institute)-Vol. 9, Iss: 10
Abstract: The performance of any business firm not only plays the role to improve the market value of that specific firm but also leads towards the growth of the whole sector which ultimately leads towards the overall prosperity of the economy Assessing the determinants of the performance of organizations has gained importance in the corporate finance literature; however, in the context of insurance sector, it has received little attention particularly in Ethiopia Accordingly, this study investigated the impact of firm level characteristics (size, leverage, tangibility, Loss ratio (risk), growth in writing premium, liquidity and age) on performance of insurance companies in Ethiopia Return on total assets (ROA) - a key indicator of insurance company's performance- is used as dependent variable while age of company, size of the company, growth in writing premium, liquidity, leverage and loss ratio are independent variables The sample includes 9 insurance companies over the period 2005-2010 The audited annual reports (Balance sheet and Profit/Loss account) of insurance companies were obtained from National Bank of Ethiopia (NBE) and insurance companies’ annual publication reports The results of regression analysis reveal that insurers’ size, tangibility and leverage are statistically significant and positively related with return on total asset; however, loss ratio (risk) is statistically significant and negatively related with ROA Thus, insurers’ size, Loss ratio (risk), tangibility and leverage are important determinants of performance of insurance companies in Ethiopia But, growth in writing premium, insurers’ age and liquidity have statistically insignificant relationship with ROA

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Topics: Leverage (finance) (55%), Market liquidity (54%), Return on assets (52%) ...read more
Citations
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Journal ArticleDOI
Abstract: The financial analysis of a company is an important tool used by actuaries in the process of decision- making on underwriting and investment activities of the insurance company. The financial performance of insurance companies is also relevant within the macroeconomic context since the insurance industry is one of the financial system’ components, fostering economic growth and stability. The financial performance of insurance companies can be analyzed at micro and macroeconomic level, being determined both by internal factors represented by specific characteristics of the company, and external factors regarding connected institutions and macroeconomic environment. This study attempts to analyze the determinants of the financial performance in the Romanian insurance market during the period 2008–2012. According to the final results achieved by applying specific panel data techniques, the determinants of the financial performance in the Romanian insurance market are the financial leverage in insurance, company size, growth of gross written premiums, underwriting risk, risk retention ratio and solvency margin.

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85 citations


Cites background from "Firm specific factors that determin..."

  • ...In this context, Mehari and Aemiro (2013) assess the impact of the Ethiopian insurance companies’ characteristics on their performance....

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Journal ArticleDOI
Emine Öner Kaya1Institutions (1)
Abstract: This study investigates the firm-specific factors affecting the profitability of non-life insurance companies operating in Turkey. For this purpose, data of 24 non-life insurance companies operating in Turkey from the period 2006–2013 were brought together to obtain 192 observed panel data sets. In this study, profitability is measured by two different variables: technical profitability ratio and sales profitability ratio. According to the empirical results, the firm-specific factors affecting the profitability of Turkish non-life insurance companies are the size of the company, age of the company, loss ratio, current ratio, and premium growth rate.

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61 citations


Journal ArticleDOI
07 Nov 2018-
Abstract: Purpose The purpose of this paper is to explore the interrelationship between macroeconomic factors, firm characteristics and financial performance of quoted manufacturing firms in Nigeria. Specifically, the study investigates the effect of interest rate, inflation rate, exchange rate and the gross domestic product (GDP) growth rate, while the firm characteristics were size, leverage and liquidity. The dependent variable financial performance is measured as return on assets (ROA). Design/methodology/approach The study used the ex post facto research design. The population comprised all quoted manufacturing firms on the Nigerian Stock Exchange. The sample was restricted to companies in the consumer goods sector, selected using non-probability sampling method. The study used multiple linear regression as the method of validating the hypotheses. Findings The study finds no significant effect for interest rate and exchange rate, but a significant effect for inflation rate and GDP growth rate on ROA. Second, the firm characteristics showed that firm size, leverage and liquidity were significant. Practical implications The study has implications for regulators and policy makers in formulating policy decisions. In addition, managers may better understand the interplay between macroeconomic factors, firm characteristics and profitability of firms. Originality/value Few studies have addressed the interplay of macroeconomic factors and firm characteristics in determining the profitability of manufacturing firms in the country and developing countries in general.

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39 citations


Cites background from "Firm specific factors that determin..."

  • ...Sambasivam and Ayele (2013) in Ethiopia, which proxied profitability as ROA, found that leverage and liquidity were significant and negative....

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  • ...On a sample of insurance companies in Ethiopia, Mehari and Aemiro (2013) revealed that size and leverage were positive and statistically significant; however, liquidity was statistically non-significant....

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  • ...Mehari and Aemiro (2013) examined firm-specific factors that determine performance in Ethiopia....

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Dissertation
01 Jan 2013-
Abstract: Organizational performance has attracted scholarly attention in corporate finance literature over several decades. However, in the conte ·t of in urance sector, it has received a little attention in developing economics. The objcctiv f thi tudy i to determine the r lationship between firm characteristics (size, div r ific tic n, k ragl.:, liquidity, age, premium growth and claim experience) and financial p 'rl( rman · r life insurance companies in Kenya. In order to carry out the study, sccondar dat ·t )r 17 I if< insurance companies over the period of 2008-2012 was obtained on the Iinam: hi p ·rf rman · from the annual reports and audited financial statements. Data collected was anal ' 7 ·d u ·1ng P ( tatistical Package for Social Scientists). Regression analysis was used to anal) z the data. The study iinding , indicate that the variables are statistically significance to influencing financial performance of life in urance companies as indicated by the positive and strong Pearson correlation coefficients. This implies that premium growth is relied upon to make conclusions about th financial performance of life insurance companies' as shown by its strong and positive correlation coefficients. Based on the findings, the study recommends that insurers must work towards improving the premiums earned to increase profits. Further studies should be undertaken to analyze the different sectors in the economy to determine any significant differences in the relationship between firm characteristics and financial performance in the different sectors incorporating more independent variables.

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29 citations


Journal ArticleDOI
Abstract: This study examines the role of the characteristics of top managers in improving the performance of companies listed in the Indonesia Stock Exchange.The sample of 40 companies from the sub sector of property, real estate, and building construction were selected based on purposive sampling technique. Supported by strong literature review, the results show the age and tenure of top managers play an important role in achieving the company performance.Moreover, the firm size is more likely able to mediate the relationship between the independent variables of age and tenure of top managers on the company performance.However, this study is not able to provide a significant evidence in terms of gender on the performance.The results underline the importance of improving the number of woman representation in top management in public companies in Indonesia.

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23 citations


Cites background from "Firm specific factors that determin..."

  • ...The determination of large companies or small size of a company can be seen from the value of total assets (Mehari and Aemiro, 2013), total sales and number of employees (Nulla, 2012) and a total market capitalization (Calisir 2010)....

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References
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Journal ArticleDOI
Abstract: Social and economic activities, like religion, entertainment, education, research, and the production of other goods and services, are carried on by different types of organizations, for example, corporations, proprietorships, partnerships, mutuals and nonprofits. There is competition among organizational forms for survival. The form of organization that survives in an activity is the one that delivers the product demanded by customers at the lowest price while covering costs. The characteristics of residual claims are important both in distinguishing organizations from one another and in explaining the survival of organizational forms in specific activities. This paper develops a set of propositions that explaim the special features of the residual claims of different organizational forms as efficient approaches to controlling agency problems. © M. C. Jensen and E. F. Fama, 1983 Michael C. Jensen, Foundations of Organizational Strategy Chapter 6, Harvard University Press, 1998. Journal of Law & Economics, Vol XXVI (June 1983) This document is available on the Social Science Research Network (SSRN) Electronic Library at: http://papers.ssrn.com/sol3/paper.taf?ABSTRACT_ID=94032 AGENCY PROBLEMS AND RESIDUAL CLAIMS

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3,283 citations


Book
01 Jan 1980-

774 citations


Journal ArticleDOI
Abstract: This article provides empirical tests of the risk differences between two types of ownership structure in the property-liability insurance industry. Empirical evidence is provided that suggests stock insurers have more risk than mutuals where the risk inherent in future cash flows is proxied by the variance of the loss ratio. Further evidence suggests that stock insurers write relatively more business than do mutuals in lines and states having higher risk. Copyright 1993 by University of Chicago Press.

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331 citations


Journal ArticleDOI
Abstract: This article examines the impact of an insurer's level of insolvency risk on the prices the insurer obtains for its products in the property-liability insurance market. The measures of insolvency risk used are those implied by the option pricing model of insurance. The key finding is the existence of a negative relation between insolvency risk and insurance prices. This implies that property-liability insurers are penalized for default risk through lower prices, despite the existence of guaranty funds. Other firm-specific determinants of insurance prices are also identified. The results have significant implications for insurance researchers and regulators.

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239 citations


"Firm specific factors that determin..." refers result in this paper

  • ...The finding of this study is congruent with, Gardner and Grace (1993); Sommer (1996); Cummins and Nini (2002); Chen and Wong (2004); Liebenberg and Sommer (2007); Malik (2011) and Ahmed et al. (2011)....

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Journal ArticleDOI
J. David Cummins1, Gregory P. Nini1Institutions (1)
Abstract: Capitalization levels in the property-liability insurance industry have increased dramatically in recent years—the capital-to-assets ratio rose from 25% in 1989 to 35% by 1999. This paper investigates the use of capital by insurers to provide evidence on whether the capital increase represents a legitimate response to changing market conditions or a true inefficiency that leads to performance penalties for insurers. We estimate “best practice” technical, cost, and revenue frontiers for a sample of insurers over the period 1993–1998, using data envelopment analysis, a non-parametric technique. The results indicate that most insurers significantly over-utilized equity capital during the sample period. Regression analysis provides evidence that capital over-utilization primarily represents an inefficiency for which insurers incur significant revenue penalties.

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209 citations