African Journal of
Business Management

  • Abbreviation: Afr. J. Bus. Manage.
  • Language: English
  • ISSN: 1993-8233
  • DOI: 10.5897/AJBM
  • Start Year: 2007
  • Published Articles: 4131

Full Length Research Paper

Effect of capital size on the profitability of listed insurance firms in Nigeria

Idris Ahmed
  • Idris Ahmed
  • Department of Business Administration, Ahmadu Bello University Zaria, Kaduna State Nigeria.
  • Google Scholar


  •  Received: 26 April 2015
  •  Accepted: 10 August 2015
  •  Published: 14 March 2016

Abstract

Financial reforms have been an ongoing process, not only in Nigeria but the world over. Prior to the recapitalization of the insurance sector in 2005, the industry was characterized by the inadequate capital base, the dearth of appropriate human capital and weak performance. The objective of this paper is to examine the effect of capital size on the profitability of insurance companies in Nigeria. The researcher used correlational research design to carry out the study. Secondary data was sourced from Nigerian Stock Exchange Fact Book 2012, and we used Panel regression model (random effect) to estimate the impact of capital size on the profitability of insurance companies in Nigeria. The results provided evidence to believe that capital size and gross premium have a positive but insignificant effect on the profitability of insurance businesses in Nigeria. Hence regulators should not put much emphasis on the issue of recapitalization of insurance companies,  but on other policies that will increase the market penetration ability of the insurance companies as indicated by the gross premium earned.

 

Key words: Recapitalization, capital size, and profitability.