Firms Characteristics and Financial Performance of General Insurance Firms in Kenya
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Date
2018
Authors
Too, Isabella Chepngetich
Simiyu, Eddie
Journal Title
Journal ISSN
Volume Title
Publisher
Serial Publishers
Abstract
Firms characteristic of insurance firms has gained the importance in the corporate
finance literature because as intermediaries. However, insurance companies have for the last two
decades been reporting poor financial performance. Some of the firms have reported profit
warnings, others have collapsed and others have been blacklisted over failure to reduce majority
shareholders stake. The general objective of this study was to establish the influence of firm’s
characteristic on financial performance of insurance firms in Kenya. The study also sought to
find out how firm size, ownership structure, firm age and capital structure influence financial
performance of insurance firms in Kenya. The study used a descriptive survey research design.
The target population was all the 47 General insurance companies in Kenya. Secondary panel
data was obtained from the financial statements of insurance companies in Kenya, company
annual reports and IRA reports. The secondary data was quantitative in nature and was analyzed
using descriptive as well as inferential statistics. Descriptive statistics included frequency
distributions, mean, standard deviation and percentages. Inferential statistics included analysis of
variance, correlation analysis and multivariate regression analysis. Data was analyzed by use of
statistical software known as STATA (version 14). The study found that among firm
characteristics, capital structure has the most significant influence on the financial performance
of insurance companies in Kenya, followed by firm age and firm size. The study found that firm
size has an inverse influence on the financial performance of insurance companies while firm
ownership has no significant influence. In addition, the study found that capital structure and
firm age have a positive and significant influence on the financial performance of insurance
companies in Kenya. The study established that market share has a significant effect of the
relationship between firm characteristics and the financial performance of insurance companies
in Kenya. The study recommends that insurance companies should have a high consideration of
increasing the company assets. This is because the size of the company is an important factor as
it influences its competitive power. Small companies have less power than large ones; hence they
may find it difficult to compete with the large firms particularly in highly competitive markets.
The study also recommends that managers in insurance companies in Kenya should consider
aggressive credit policies to maximize the use of debt in capital spending activity so as to
improve the financial performance of their companies An appropriate mix of capital structure
should be adopted in order to increase the profitability of firms.
Description
A Research Article in the International Journal of Business Management & Finance
Keywords
Financial performance, Size, Age, Capital Structure, Ownership
Citation
Too, I. C., & Simiyu, E. (2018). Firms characteristics and Financial Performance of general insurance firms in Kenya. International Journal of Business Management & Finance, 1 (39): 672, 89.