Big vs. Small Insurers; Does Size Matter? Moderating Effects of Firm Size on Liquidity Risk and Credit Risk on the Profitability of Insurance Firms in Kenya
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Date
2026-01
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IJARKE
Abstract
The insurance sector represents a major component of the broader non-bank financial system and plays a pivotal role in supporting economic activity across both developing and advanced economies. In the Kenyan context, declining profitability has been a prominent challenge, contributing to the financial distress and eventual collapse of at least nine insurance companies over the past decade. This study sought to evaluate whether firm size moderates the relationship between liquidity risk & Credit risk and the profitability of insurance firms operating in Kenya. The conceptual foundation of the research drew on several theoretical perspectives, including Modern Portfolio Theory, Agency Theory and Institutional Theory. A positivist philosophical stance and an explanatory research design guided the methodological approach. The study covered all 55 licensed insurance firms listed by the Insurance Regulatory Authority (IRA) as at 31 December 2022. Secondary data were obtained from audited financial statements available through the IRA and the Association of Kenya Insurers (AKI) digital repositories for the period 2014–2022, supplemented by additional information from the Central Bank of Kenya and the Kenya National Bureau of Statistics. Data analysis employed descriptive statistics, panel regression techniques, and Pearson’s product–moment correlation to assess the relationships among the study variables. Firm size was found not to be a significant moderator in this study, since it did not significantly change the decision rule in the model, indicating that the effects of liquidity and credit risks on ROE and ROA were consistent across insurance firms regardless of their asset scale.
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Gitau, K., Wamugo, L., & Omagwa, J. (2026). Big vs. small insurers: Does size matter? Moderating effects of firm size on liquidity risk and credit risk on the profitability of insurance firms in Kenya. IJARKE Business & Management Journal, 8(2). https://doi.org/10.32898/ibmj.01/8.2article09