Vol 1 No 2 (2019)
Articles

Effect of Capital Structure on the Profitability of Listed Insurance Firms in Nigeria

Abdul Kerim
Department of Accounting and Finance, Ahmadu Bello University,Nigeria
John Alaji
Department of Accounting and Finance, Ahmadu Bello University, Nigeria
Idachaba Odekina Innocent
Department of Accounting and Finance, Ahmadu Bello University, Nigeria
Published May 7, 2019
Keywords
  • Profitability, Short-Term Debt, Long-Term Debt and Premium Growth
How to Cite
Kerim, A., Alaji, J., & Innocent, I. O. (2019). Effect of Capital Structure on the Profitability of Listed Insurance Firms in Nigeria. American International Journal of Economics and Finance Research, 1(2), 36-45. Retrieved from http://www.acseusa.org/journal/index.php/aijefr/article/view/69

Abstract

This study examined the effect of capital structure on profitability of listed insurance firms in Nigeria for the period 2013-2017 The study used correlation research design. The source of data which were collected from the published annual financial reports of studies listed insurance firms in Nigeria. The population of the study comprised of the 28 listed insurance firms. The sample size was fifteen (15) listed insurance firms in Nigeria. The data collected were analyzed with the aid of OLS multiple regression technique. Using 75 firm-year paneled observations, the result of the ordinary least square regression showed that short-term debt has a negative and significant effect on the profitability of listed insurance firms in Nigeria. In addition, long-term debt has a positive and significant effect on profitability. Finally, premium growth has positively significant effect on profitability of listed insurance firms.  Based on the findings, the study recommends that the management of listed insurance firms should strive towards having optimum capital structure by increasing their equity level and reducing dependence on debts so as to avoid being cash strapped and debt ridden.

JEL classification: C88, G22, G24, G29

Downloads

Download data is not yet available.

References

  1. Abu-Rub, N., 2012. Capital structure and firm performance: Evidence from Palestine stock exchange. J. Money Investment Bank., 23: 109-116.
  2. Akinlo, O. (2011). Determinants of Capital Structure: Evidence from Nigeria Panel Data” African Economic and Business Review. 9 (1), 9-16.
  3. Aftab M, Ehsan R, Naseer S, Awan T (2012). The effect of corporate strategy and capital structure on performance of banking sector of Pakistan. Global Journal of Management and Business Research. 12(17), 67-79
  4. Anafo, S. A., Amponteng, E., & Yin, L. (2015). The Impact of Capital Structure on Profitability of Banks Listed on the Ghana Stock Exchange. Research Journal of Finance and Accounting.
  5. BURCA, A.-M., & BATRINCA, G. (2014). The Determinants of Financial Performance in the Romanian Insurance Market. International Journal of Academic Research in Accounting, Finance and Management Sciences. https://doi.org/10.6007/IJARAFMS/v4-i1/637
  6. Chechet, Ishaya Luka and Olayiwola, A. B. (2014). Capital Structure and Profitability of Nigerian Quoted Firms : The Agency Cost Theory Perspective. American International Journal of Social Science, 3(1), 139–158. https://doi.org/10.1080/10426914.2010.536937
  7. Cyril, U. M. (2016). No Titleпрроо. Ммит, 4(6), 2016.
  8. Gill, A., & Biger, N. (2011). The Effect of Capital Structure on Profitability : Evidence from the United States. International Journal of Management. https://doi.org/10.1016/j.tet.2007.06.107
  9. Hifza Malik, (2011) Determinants of Insurance Companies Profitability: An Analysis of Insurance Sector Of Pakistan, Academic Research International, Volume 1, Issue 3,
  10. Ishaya, L. C., & Abduljeleel, B., O. (2014). Capital Structure and Profitability of Nigerian Quoted Firms : The Agency Cost Theory Perspective. American International Journal of Social Science, 3(1), 139–158.
  11. Muritala T. A. (2012) An Empirical Analysis of Capital Structure on Firms’ Performance in Nigeria. International Journal of Advances in Management and Economics Available online at kwww.managementjournal.info ISSN: 2278-3369.
  12. Musah, A. (2018). The Impact of Capital Structure on Profitability of Commercial Banks in Ghana. Asian Journal of Economic Modelling. https://doi.org/10.18488/journal.8.2018.61.21.36
  13. Pradhan, R. S., & Khadka, P. (2017). Firm Specific and Macro-Economic Determinants of Corporate Capital Structure: A Case of Nepalese Commercial Banks. SSRN. https://doi.org/10.2139/ssrn.3044061
  14. Onaolapo, A & Kajola, S. (2010). “Capital Structure and Firm Performance: Evidence from Nigeria” European Journal of Economics, Finance and Administrative Sciences
  15. Olokoyo, F. O. (2012). Capital Structure and Corporate Performance of Nigerian Quoted Firms.
  16. Thangavelu.(2015).FDI Restrictiveness Index for ASEAN : Implementation of AEC Blueprint Measures