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Determinants of profitability of insurance companies in Ethiopia: evidence from insurance companies from 2011 to 2020 years

Author

Listed:
  • Adam Tsega Worku

    (Woldia University)

  • Yenefenta Wube Bayleyegne

    (Woldia University)

  • Zenebe Berie Tafere

    (Woldia University)

Abstract

The profitability of insurance companies has been the focus of several studies within the rise of economies across the countries worldwide. This study aimed to identify determinants of profitability of insurance companies in Ethiopian. The study used nine insurance companies selected by purposive sampling technique among the total 17 insurance companies in Ethiopia from period of 2011 to 2020 based on their establishment. Descriptive, causal research design and quantitative research approach were adopted in carrying out this study. Classical linear regression model under estimation of ordinary least square was employed to identify the determinants of profitability of insurance companies in Ethiopia at 5% level of significance. The classical linear regression model revealed that variable age of the company, tangibility of an asset, size of the company, managerial efficiency, leverage ratio, premium growth and GDP have a positive coefficient relationship with return on asset while loss ratio and inflation have a negative coefficient relationship with return on asset. On the other hand, age of the company size, managerial efficiency, leverage ratio, liquidity ration inflation and premium growth have statistically significant at 5% confidence interval level, whereas the other variables such tangibility of asset and GDP have no statistical significance at 5% confidence interval level. The insurance companies’ previous profit, age of the company, company size, managerial efficiency, leverage ratio, liquidity ratio, loss ratio, premium growth and inflation rate variables are significant key drivers of profitability of Ethiopian insurance companies. Giving due attention to the sector in line with key factors affecting the profitability will improve the overall performance of the insurance companies in Ethiopia.

Suggested Citation

  • Adam Tsega Worku & Yenefenta Wube Bayleyegne & Zenebe Berie Tafere, 2024. "Determinants of profitability of insurance companies in Ethiopia: evidence from insurance companies from 2011 to 2020 years," Journal of Innovation and Entrepreneurship, Springer, vol. 13(1), pages 1-19, December.
    • Handle: RePEc:spr:joiaen:v:13:y:2024:i:1:d:10.1186_s13731-023-00357-1
    DOI: 10.1186/s13731-023-00357-1
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    References listed on IDEAS

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    1. Eric Kofi Boadi & Samuel Antwi & Victor Curtis Lartey, 2013. "Determinants of Profitability of Insurance Firms in Ghana," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 3(3), pages 43-50, March.
    2. Abdelkader Derbali & Lamia Jamel, 2018. "Determinants of performance of Tunisia insurance companies: case of life insurance," International Journal of Productivity and Quality Management, Inderscience Enterprises Ltd, vol. 24(4), pages 531-542.
    3. M. Adams & M. Buckle, 2003. "The determinants of corporate financial performance in the Bermuda insurance market," Applied Financial Economics, Taylor & Francis Journals, vol. 13(2), pages 133-143.
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    Cited by:

    1. Sylvester Senyo Horvey & Jones Odei-Mensah, 2025. "Re-examining the microeconomic and macroeconomic determinants of nonlife insurers profitability in South Africa: insights from linear and threshold analysis," Journal of Innovation and Entrepreneurship, Springer, vol. 14(1), pages 1-29, December.

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