Firm Characteristics, Inflation, Revenue Efficiency and Financial Stability of Insurance Firms in Kenya
| dc.contributor.author | Ritho, Bonface Mugo | |
| dc.date.accessioned | 2024-09-27T11:51:27Z | |
| dc.date.available | 2024-09-27T11:51:27Z | |
| dc.date.issued | 2024-02 | |
| dc.description | A Thesis Submitted to the School of Business, Economics and Tourism in Partial Fulfillment of the Requirements for the Award of Degree of Doctor of Philosophy in Business (Finance Option) of Kenyatta University February, 2024 Supervisors: 1. Eddie Simiyu 2. Job Omagwa | |
| dc.description.abstract | The insurance industry plays a crucial role in fostering the ongoing growth and prosperity of the economy. The insurance sector is accountable for ensuring the ongoing survival of businesses, mitigating the risk associated with financial losses, and striving to eliminate uncertainty for investors. Although the insurance sector serves a vital role, companies within this industry have been facing challenges in preserving their financial soundness. The insurance industry has experienced significant fluctuations in profitability, leading to the placement of several companies under receivership or even their closure. The primary objective of this research study was to evaluate the effect of firm characteristics on the financial performance of Kenyan insurance firms. Additionally, the study assessed inflation as a moderating factor in these relationships, and how the efficiency in generating revenue mediates the link between corporate characteristics and financial stability. This study was supported by a number of theoretical models, such as the Theory of Distress by Wreckers, Capital Buffer Theory, the Pecking Order Hypothesis, Gibrat's Law, Trade-off Hypothesis, Economic Efficiency Theory, Price Theory, and the Resource-Based View Theory. The study employed an explanatory research design and adopted a positivist philosophical approach. The study focused on a specific group of insurance firms, namely the 46 companies that possessed IRA licenses and were actively functioning between 2014 and 2021. The research thesis employed the census approach to examine all 46 insurance firms in Kenya. The research thesis was based on secondary data. Before conducting the inferential analysis, many tests were performed, such as multicollinearity, normality, autocorrelation, homoscedasticity, stationarity, and model definition. The research outcomes were represented using tables, figures, and graphs. The study complied with research ethical norms. The study findings revealed that the use of leverage has a considerable and adverse effect on the financial viability of insurance companies in Kenya. In contrast, the size of the firm had a notable and favourable impact on the financial stability of these companies. The study found that the loss ratio had a strong negative effect on the financial stability of insurance companies in Kenya, while capital adequacy had a notable beneficial impact on their financial stability. The study findings showed that the relationship between firm characteristics and the financial stability of Kenyan insurance companies is not significantly impacted by inflation. Moreover, it is impossible to dispute the idea that revenue efficiency plays no discernible role as a mediator in the connection between these companies' financial stability and their organizational characteristics. Consequently, the study recommends that general insurers in Kenya should reduce their reliance on borrowed funds, raise the scale of their operations, effectively control their loss ratio, and bolster their capital sufficiency in order to improve their financial stability. Nevertheless, it is crucial for them to practice prudence while utilizing leverage, since an excessive dependence on it may endanger their long-term viability. Kenya should also be advised to conform to the standards of the Solvency II framework. | |
| dc.description.sponsorship | Kenyatta University | |
| dc.identifier.uri | https://ir-library.ku.ac.ke/handle/123456789/28938 | |
| dc.language.iso | en | |
| dc.publisher | Kenyatta University | |
| dc.title | Firm Characteristics, Inflation, Revenue Efficiency and Financial Stability of Insurance Firms in Kenya | |
| dc.type | Thesis |