Capital Structure and Financial Performance of Insurance Industries in Ethiopia

Mohammed Getahun

Capital Structure and Financial Performance of Insurance Industries in Ethiopia

Mohammed Getahun * §

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§ Jimma University

Capital Structure and Financial Performance of Insurance Industries in Ethiopia

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Abstract

An appropriate capital structure is a critical decision for any business organization to be taken by business organization for maximization of shareholders wealth and sustained growth. Thus, the major focus of this study is to investigate empirically firm specific factors such as, firm leverage, growth opportunities, size, risk, tangibility and liquidity were impacts on performance in Ethiopian insurance companies from 2004-2013 annual reports. The results show that firm leverage, Size, tangibility and business risk are significant impact on performance of insurance companies in Ethiopia. While firm growth and liquidity are not clear and statistical proved relationship are obtained from the regression analysis. The results provide strong evidence in support of the pecking order theory of capital structure which asserts that leverage is a significant determinant of firms’ performance. A significant negative relationship is established between leverage and performance. From the findings the researcher recommended that the sample of insurance companies in Ethiopia use more equity than debt in financing their business activities, this because if the value of business can be enhanced with debt capital, it is dangerous for the firm.

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Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

Data Availability

Not applicable for this article.

How to Cite This Article

Mohammed Getahun. 2016. "Capital Structure and Financial Performance of Insurance Industries in Ethiopia". Global Journal of Management and Business Research - C: Finance GJMBR-C Volume 16 (GJMBR Volume 16 Issue C7).

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GJMBR Volume 16 Issue C7

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Journal Specifications

Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

Keywords

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Classification

GJMBR-C Classification JEL Code: G19

Submission ReceivedDecember 10, 2015
Peer Review Double Blind
Handling Editor
Accepted January 1, 2016
Published January 15, 2016

Version of record

v1.2

Issue date

August 17, 2016

Language

English

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Article Matrices

Total Score: 118

Country: Ethiopia

Subject: Global Journal of Management and Business Research

Authors: Mohammed Getahun (PhD/Dr. count: 0)

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Publish Date: 2016 01, Fri

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