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Relationship between firm's characteristics and profitability of Nepalese insurance companies / devi Deuba
Title : Relationship between firm's characteristics and profitability of Nepalese insurance companies Material Type: printed text Authors: devi Deuba, Author Publication Date: 2019 Pagination: 133p. Size: GRP/Thesis Accompanying material: 2nd/Gmba Languages : English Abstract: The insurance sector plays an important role in the service-based economy and its services are now being integrated into wider financial industry. Insurance companies act as financial intermediaries. The Assessment on the determinants of performance of insurers has gained the importance in the corporate finance literature as they act as intermediaries, these companies not only provide the mechanism of risk transfer, but also helps to proper utilize the funds in an appropriate way to support the business activities in the economy. Financial institutions like insurance companies are very important to enhance economic growth and development. Insurance companies serve the needs of business units and private individuals in financial intermediation. Insurance companies play a key role in financial sector. In developed countries, it accounts for a significant portion of the economy. By collecting relative premium from many small individuals in the economy, insurance companies are able to pull a large pool of funds that could be invested in both short and long term periods in order to get profits from investments. Generally, the firm’s performance can be estimated by measuring the firm’s profitability, and insurer’s performance is related to such potential determinants as company’s size, leverage, tangibility, age of the company, and growth premium of written insurance premiums past performance. Profitability as a financial performance is the function of the ability of an organization to gain and manage the resources in several different ways to develop competitive advantage.
The study attempts to examine the relationship between firm’s characteristics and profitability of Nepalese insurance companies. Return on assets and return on equity are the dependent variables. The independent variables are firm size, firm age, premium growth rate, tangibility, liquidity and leverage. The study is based on secondary data of 16 insurance companies with 128 observations for the period of 2010/11 to 2017/18. The secondary data and information have been collected from annual reports of selected insurance companies. The regression models are estimated to test the significance and impact of different variables on financial stability of Nepalese insurance companies. The findings of the paper are largely original in the area of capital structure of Nepalese insurance companies.
The result shows that average return on assets for Nepalese insurance companies is PICL (12.30 percent) and lowest for LIC (1.16 percent), average total return on equity for Nepalese insurance companies is highest for NLIC (41.73 percent) and lowest for PRIC (14.72 percent), average firm size for Nepalese insurance companies is highest for NLIC ( 23.79 million) and lowest for IGI (19.78 million), average premium growth for Nepalese insurance companies is highest for SLICL (56.84 percent), and lowest for UIC (14.89 percent), average assets tangibility for Nepalese insurance companies is highest for NALIC (31%) and lowest for GICIL (1.75%), average liquidity for the Nepalese insurance companies is highest for NLIC (8.51 percent) and lowest for SGIC (0.26 percent) and average leverage for the Nepalese insurance companies is highest for UIC (73.31 percent) and lowest for LIC (5.47 percent).
The descriptive statistics shows that return on assets ranges from a minimum of 0.00 percent to the maximum of 15.73 percent to the average of. 5.78. However, return on equity ranges from minimum of 2.84 percent to maximum of 70.05 percent leading to an average of 23.49 percent. The average firm size of selected insurance companies during the study period is noticed to be with a minimum of 3.64 million and a maximum of 9.16 million with an average of 7.04 billion. Likewise, firm age a minimum of 1.00 years to maximum of -26 years with an average of 11.06 years. The average of premium growth of selected insurance companies during the study period is noticed to be 30.09 percent with minimum of -47.90 percent and maximum of 298.09 percent. Similarly, the average of assets tangibility during the study period is noticed to be 10.11 percent with a minimum of 0.03 percent and a maximum of 54.42 percent. The liquidity ratio ranges from minimum of 0.03 percent to maximum of 17.22 percent, leading to an average of 2.37 percent and the average leverage ratio of selected insurance companies during the study period is noticed to be with a minimum of 2.44 percent and a maximum of 85.15 percent with an average of 37.73 percent.
The results shows that there is a positive relationship between firm size and return on assets. This means that larger the firm size, higher would be the return on assets. Likewise, there is a positive relationship between premium growth and return on assets. This means that increase in premium growth leads to increase in return on assets. However, there is a negative relationship between assets tangibility and return on assets. This means that increase in assets tangibility leads to decrease in return on assets. Similarly, there is a negative relationship between liquidity and return on assets. This means that increase in liquidity ratio leads to decrease in return on assets. Further, there is a positive relationship between leverage and return on assets. This means that increase in total debt to total equity ratio leads to increase in return on assets.
Similarly, the result shows that there is a positive relationship between firm size and return on equity. This means that larger the firm size, higher would be the return on equity. Similarly, premium growth has a positive relationship with return on equity. This indicates that increase in the premium leads to increase in return on equity. Similarly, assets tangibility has a positive relationship with return on equity. This means that increase in assets tangibility leads to increase in return on equity. Further, there is a positive relationship between liquidity and return on equity. This means that increase in liquidity ratio leads to increase in return on equity. Similarly, there is a negative relationship between leverage ratio and return on equity. This means that increase in leverage ratio leads to decrease in return on equity.
The regression analysis shows that beta coefficients are negative for liquidity and tangibility indicating that higher the liquidity and tangibility, lower would be the return on assets and vice-versa. However, it is positive for firm size, firm age, premium growth and leverage indicating that higher the firm size, firm age, premium growth and leverage higher would be the return on assets and vice-versa.
The regression analysis shows that beta coefficients are negative for firm age and leverage indicating that higher the firm age and leverage lower would be the return on equity and vice-versa. However, it is positive for firm size, premium growth, asset tangibility, and liquidity indicating that higher the firm size, premium growth, asset tangibility, and liquidity higher would be the return on equity and vice-versa.
Relationship between firm's characteristics and profitability of Nepalese insurance companies [printed text] / devi Deuba, Author . - 2019 . - 133p. ; GRP/Thesis + 2nd/Gmba.
Languages : English
Abstract: The insurance sector plays an important role in the service-based economy and its services are now being integrated into wider financial industry. Insurance companies act as financial intermediaries. The Assessment on the determinants of performance of insurers has gained the importance in the corporate finance literature as they act as intermediaries, these companies not only provide the mechanism of risk transfer, but also helps to proper utilize the funds in an appropriate way to support the business activities in the economy. Financial institutions like insurance companies are very important to enhance economic growth and development. Insurance companies serve the needs of business units and private individuals in financial intermediation. Insurance companies play a key role in financial sector. In developed countries, it accounts for a significant portion of the economy. By collecting relative premium from many small individuals in the economy, insurance companies are able to pull a large pool of funds that could be invested in both short and long term periods in order to get profits from investments. Generally, the firm’s performance can be estimated by measuring the firm’s profitability, and insurer’s performance is related to such potential determinants as company’s size, leverage, tangibility, age of the company, and growth premium of written insurance premiums past performance. Profitability as a financial performance is the function of the ability of an organization to gain and manage the resources in several different ways to develop competitive advantage.
The study attempts to examine the relationship between firm’s characteristics and profitability of Nepalese insurance companies. Return on assets and return on equity are the dependent variables. The independent variables are firm size, firm age, premium growth rate, tangibility, liquidity and leverage. The study is based on secondary data of 16 insurance companies with 128 observations for the period of 2010/11 to 2017/18. The secondary data and information have been collected from annual reports of selected insurance companies. The regression models are estimated to test the significance and impact of different variables on financial stability of Nepalese insurance companies. The findings of the paper are largely original in the area of capital structure of Nepalese insurance companies.
The result shows that average return on assets for Nepalese insurance companies is PICL (12.30 percent) and lowest for LIC (1.16 percent), average total return on equity for Nepalese insurance companies is highest for NLIC (41.73 percent) and lowest for PRIC (14.72 percent), average firm size for Nepalese insurance companies is highest for NLIC ( 23.79 million) and lowest for IGI (19.78 million), average premium growth for Nepalese insurance companies is highest for SLICL (56.84 percent), and lowest for UIC (14.89 percent), average assets tangibility for Nepalese insurance companies is highest for NALIC (31%) and lowest for GICIL (1.75%), average liquidity for the Nepalese insurance companies is highest for NLIC (8.51 percent) and lowest for SGIC (0.26 percent) and average leverage for the Nepalese insurance companies is highest for UIC (73.31 percent) and lowest for LIC (5.47 percent).
The descriptive statistics shows that return on assets ranges from a minimum of 0.00 percent to the maximum of 15.73 percent to the average of. 5.78. However, return on equity ranges from minimum of 2.84 percent to maximum of 70.05 percent leading to an average of 23.49 percent. The average firm size of selected insurance companies during the study period is noticed to be with a minimum of 3.64 million and a maximum of 9.16 million with an average of 7.04 billion. Likewise, firm age a minimum of 1.00 years to maximum of -26 years with an average of 11.06 years. The average of premium growth of selected insurance companies during the study period is noticed to be 30.09 percent with minimum of -47.90 percent and maximum of 298.09 percent. Similarly, the average of assets tangibility during the study period is noticed to be 10.11 percent with a minimum of 0.03 percent and a maximum of 54.42 percent. The liquidity ratio ranges from minimum of 0.03 percent to maximum of 17.22 percent, leading to an average of 2.37 percent and the average leverage ratio of selected insurance companies during the study period is noticed to be with a minimum of 2.44 percent and a maximum of 85.15 percent with an average of 37.73 percent.
The results shows that there is a positive relationship between firm size and return on assets. This means that larger the firm size, higher would be the return on assets. Likewise, there is a positive relationship between premium growth and return on assets. This means that increase in premium growth leads to increase in return on assets. However, there is a negative relationship between assets tangibility and return on assets. This means that increase in assets tangibility leads to decrease in return on assets. Similarly, there is a negative relationship between liquidity and return on assets. This means that increase in liquidity ratio leads to decrease in return on assets. Further, there is a positive relationship between leverage and return on assets. This means that increase in total debt to total equity ratio leads to increase in return on assets.
Similarly, the result shows that there is a positive relationship between firm size and return on equity. This means that larger the firm size, higher would be the return on equity. Similarly, premium growth has a positive relationship with return on equity. This indicates that increase in the premium leads to increase in return on equity. Similarly, assets tangibility has a positive relationship with return on equity. This means that increase in assets tangibility leads to increase in return on equity. Further, there is a positive relationship between liquidity and return on equity. This means that increase in liquidity ratio leads to increase in return on equity. Similarly, there is a negative relationship between leverage ratio and return on equity. This means that increase in leverage ratio leads to decrease in return on equity.
The regression analysis shows that beta coefficients are negative for liquidity and tangibility indicating that higher the liquidity and tangibility, lower would be the return on assets and vice-versa. However, it is positive for firm size, firm age, premium growth and leverage indicating that higher the firm size, firm age, premium growth and leverage higher would be the return on assets and vice-versa.
The regression analysis shows that beta coefficients are negative for firm age and leverage indicating that higher the firm age and leverage lower would be the return on equity and vice-versa. However, it is positive for firm size, premium growth, asset tangibility, and liquidity indicating that higher the firm size, premium growth, asset tangibility, and liquidity higher would be the return on equity and vice-versa.
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Barcode Call number Media type Location Section Status 672/D DEV Thesis/Dissertation Uniglobe Library Philosophy & Psychology Available