Determinants of Profitability Performance of Insurance Companies: A Case Study of Selected Insurance Companies in Ethiopia

Volume 12 Issue 2 September - November 2017

Research Paper

Determinants of Profitability Performance of Insurance Companies: A Case Study of Selected Insurance Companies in Ethiopia

D. Guruswamy*, Adugnaw Marew**

* Associate Professor, Department of Accounting & Finance, College of Business & Economics, Arsi University, Asella, Ethiopia.

** Lecturer, Department of Accounting & Finance, Faculty of Business & Economics, Wachamo University, Hossana, Ethiopia.

Guruswamy, D., and Marew, A. (2017). Determinants of Profitability Performance of Insurance Companies: A Case Study of Selected Insurance Companies in Ethiopia. i-manager’s Journal on Management, 12(2), 26-44. https://doi.org/10.26634/jmgt.12.2.13722

Abstract

The aim of this research is to examine the determinants of profitability performance of selected insurance companies in Ethiopia. The researchers used only secondary data type from selected insurance companies, viz., National Bank of Ethiopia (NBE) and Ministry of Finance and Economic cooperation (MoFEC). Ten independent variables, viz., i.e. leverage, growth opportunities, business risk, size of the firm, tangibility of assets, liquidity, age of the firm, management efficiency, inflation and GDP, and one dependent variable (return on asset) were used in this study. To see the relationship between dependent and independent variables under the study, explanatory research design was used. To select sample units for the study purposive sampling method was employed. Descriptive, correlation and multiple regression analysis were employed for analysis of collected balanced panel data. The result of the study shows that growth, age, business risk, GDP, inflation and management efficiency are the most vital determinant factors of profitability. GDP, firm growth, inflation and management efficiency has significant and negative relationship with profitability, and age and business risk has significant and positive impact on profitability. Though, liquidity, size, tangibility and leverage have no significant relationship with profitability.