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Establishing the Relationship Between the Capital Structure, Intellectual Capital, and Financial Performance of SSA Insurance Companies

Author

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  • Thabiso Sthembiso Msomi

    (School of Accounting Economics and Finance, University of KwaZulu-Natal, Durban 4041, South Africa)

  • Odunayo Magret Olarewaju

    (Department of Accounting, Metro State University, St. Paul, MN 55106, USA)

  • Mabutho Sibanda

    (School of Accounting Economics and Finance, University of KwaZulu-Natal, Durban 4041, South Africa)

Abstract

This research examines the relationship between capital structure, intellectual capital, and financial performance among insurance companies in Sub-Saharan Africa (SSA). Anchored in a positivist paradigm, the study employed descriptive and quantitative methodologies, leveraging secondary panel data spanning from 2010 to 2022 across 122 insurance firms sampled from a population of 178 companies across 46 SSA countries. Utilizing a Panel Vector Error Correction Model (P-VECM), the analysis explored long-term equilibrium relationships and dynamic interactions among variables, including return on assets (ROAs), debt-to-equity ratio (DER), long-term debt (LTD), short-term debt (STD), Value-Added Intellectual Coefficient (VAIC™), and firm size (SIZE). Optimal lag lengths were determined through robust statistical criteria, ensuring model precision. The impulse response analysis revealed significant findings: variations in ROA negatively impacted intellectual capital (VAIC), leverage indicators (DER, LTD, and STD), and positively influenced firm size over a ten-period horizon. Specifically, decreases in ROA were consistently associated with reduced intellectual capital effectiveness and adverse financial liquidity conditions, while increased firm size correlated positively with improved financial performance.

Suggested Citation

  • Thabiso Sthembiso Msomi & Odunayo Magret Olarewaju & Mabutho Sibanda, 2025. "Establishing the Relationship Between the Capital Structure, Intellectual Capital, and Financial Performance of SSA Insurance Companies," JRFM, MDPI, vol. 18(9), pages 1-24, August.
    • Handle: RePEc:gam:jjrfmx:v:18:y:2025:i:9:p:481-:d:1735833
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    References listed on IDEAS

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