FACTORS AFFECTING FINANCIAL PERFORMANCE OF ETHIOPIAN INSURANCE COMPANIES

Abstract

Factors’ affecting financial performance of Ethiopian insurance companies has been considered to be an important issue on financial performance of Ethiopian insurance companies. This study empirically examines factors that affecting financial performance of insurance companies in Ethiopia and interprets the result by relating with the regulations. The study used balanced data model in examining the regression model and collect data from eight insurance companies covering the period of eighteen (18)consecutive years, 2000-2017.To this end, the study employed quantitative research approach by reviewing documentary analysis. The study used panel data techniques specifically fixed effect model on the regression analysis and used E-view8 software. The study used one dependent variable return on asset (ROA), eight independent variables that are Credit risk, liquidity ratio, reinsurance dependence, company size, technical provisions risk, underwriting risk, inflation rate and deposit interest rate. The regression result show that credit risk, liquidity ratio, underwriting risk and technical provisions risk show negative and significant effect at 5% significance level on financial performance of insurance companies in Ethiopia, In addition company size and deposit interest rate have positive and significant effect at 5% significance level on financial performance of insurance companies in Ethiopia, Whereas reinsurance dependency and inflation has insignificant effect at 5% significance level on performance of insurance companies. The research concluded that factors affecting on the performance of Ethiopian insurance companies has significant effect on the performance of Ethiopian insurance companies. Hence, the study recommend in support of each variables for Ethiopian insurance companies to give due attention on factors affecting of financial performance to enhance their performance significantly.