Firm specific factors that determine insurance companies’ performance in ethiopia
TL;DR: In this paper, the authors investigated the impact of firm level characteristics (size, leverage, tangibility, loss ratio (risk), growth in writing premium, liquidity, leverage and loss ratio) on performance of insurance companies in Ethiopia.
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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TL;DR: In this paper, the authors examined the role of the characteristics of top managers in improving the performance of companies listed in the Indonesia Stock Exchange and found that the age and tenure of the top managers played an important role in achieving the company performance.
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.
29 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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Posted Content•
TL;DR: In this paper, the authors used factor analysis and multiple linear regression models to determine the factors affecting the performance of insurance companies in Zimbabwe and identified their impact, finding that expense ratio, claims ratio and the size of a company significantly affect insurance companies performance negatively.
Abstract: The study sought to examine factors affecting the performance of insurance companies in Zimbabwe. We utilized secondary data from twenty short-term insurance companies. The data was for the period from 2010 to 2014. We used factor analysis and multiple linear regression models to determine the factors affecting performance and identifying their impact. Our findings revealed that expense ratio, claims ratio and the size of a company significantly affect insurance companies’ performance negatively. Whilst leverage and liquidity affect performance positively. We recommend that insurance companies should introduce mechanisms that reduces operational costs such as automated systems.JEL classification numbers: C3, G1, G22Keywords: Performance, Insurance, Regression Analysis, Factor Analysis
29 citations
01 Jan 2019
TL;DR: In this paper, the authors compared two insurance industries, analysis possible determinants of financial performance during global financial crisis, collected 24 insurance companies' Quarterly data from 2007-16 and applied panel data techniques.
Abstract: The economy as well as insurance industry of USA and UK face decline during last decade. The researcher compares two insurance industries, analysis possible determinants of financial performance during global financial crisis, collected 24 insurance companies’ Quarterly data from 2007-16 and applied panel data techniques. Explanatory variables based on internal (Size of firm, liquidity, leverage and asset turnover) and external factors (GDP (Gross Domestic Product), CPI (Cost per Impression), interest rate and WTI (West Texas Intermediate)). Dependent variable: ROA (Return on Assets) and ROE (Return on Equity) (profitability indicators). This study concludes; In USA size of firm, liquidity, leverage, asset turnover, GDP and WTI have positive while CPI and interest rate have negative significant impact. In UK size of firm, liquidity, GDP, CPI and WTI have positive but leverage, asset turnover and interest rate has negative significant impact; US insurance is efficient as compare to UK. These findings will be helpful for insurance industries, government, policymakers and investors in taking decision and improving the performance.
23 citations
01 Jan 2018
22 citations
Cites background or result from "Firm specific factors that determin..."
...The result is also in line with the finding of Daniel and Tilahun (2012). Sales Growth and Profitability...
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...Daniel and Tilahun (2012) examined the impact of firm level characteristics ( firm size,...
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Journal Article•
TL;DR: In this article, a study was conducted on the determinants of profitability of Ethiopian insurance industry, which examined the firm specific factors which are age of company, size of company and leverage ratio, liquidity ratio, premium growth, technical provision, underwriting risk, solvency, reinsurance dependency and tangibility of assets and macroeconomic factors.
Abstract: This study was conducted on the determinants of profitability of Ethiopian insurance industry The study attempts to examine the firm specific factors which are age of company, size of company, leverage ratio, liquidity ratio, premium growth, technical provision, underwriting risk, solvency, reinsurance dependency and tangibility of assets and macroeconomic factors; GDP and Inflation on profitability of Ethiopian insurance industry Nine insurance companies from the total of 17insurance companies established before 2008 were included in the study Secondary data that was collected from the financial statements (Balance sheet and income statements) of insurance companies; and annual reports of National bank of Ethiopia are the major sources of data for this study This study found that under writing risk, technical provision, leverage and inflation have negative and significant effect whereas premium growth, age of the company, solvency ratio and GDP have statically positive and significant relationship with the profitability of Ethiopian insurance industry However, the study found that liquidity, re-insurance dependency, tangibility of assets and company size have no significant effect on the profitability of insurance industry in Ethiopia
19 citations
References
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TL;DR: Jensen and Fama as mentioned in this paper developed a set of propositions that explaim the special features of the residual claims of different organizational forms as efficient approaches to controlling agency problems and explained the survival of organizational forms in specific activities.
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
3,594 citations
DOI•
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TL;DR: This paper explored the characteristics, processes, and particularities of three brand communities (those centered on Ford Bronco, Macintosh, and Saab) and found that these brand communities exhibit three traditional markers of community: shared consciousness, rituals and traditions, and a sense of moral responsibility.
Abstract: This article introduces the idea of brand community. A brand community is a specialized, non-geographically bound community, based on a structured set of social relations among admirers of a brand. Grounded in both classic and contemporary sociology and consumer behavior, this article uses ethnographic and computer mediated environment data to explore the characteristics, processes, and particularities of three brand communities (those centered on Ford Bronco, Macintosh, and Saab). These brand communities exhibit three traditional markers of community: shared consciousness, rituals and traditions, and a sense of moral responsibility. The commercial and mass-mediated ethos in which these communities are situated affects their character and structure and gives rise to their particularities. Implications for branding, sociological theories of community, and consumer behavior are offered.
1,782 citations
TL;DR: In this paper, the authors provide empirical tests of the risk differences between two types of ownership structure in the property-liability insurance industry and provide empirical evidence 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.
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.
337 citations
TL;DR: In this paper, the authors examined 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.
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.
248 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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