Browsing by Author "Macharia, Monica W."

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    Effect Of Firm Characteristics On The Financial Performance Of Insurance Companies In Kenya
    (KCA University, 2019) Macharia, Monica W.
    Insurance makes a noteworthy contribution to financial development and improvement of the economy and is a vital part in cultivating business investment and infrastructural progression and expansion. Insurance facilitates economic dealings by providing indemnification and risk transfer. It also encourages management of risks while promoting safe practices in business transactions, encourages financial steadiness by offering long-lasting investment in the economy. Insurance also stimulates steady and viable savings and in provision of pension. The performance of insurance is, therefore, a critical component that warrants attention. In light of the above preceding, the foundation of the study was to evaluate the effects of firm characteristics on the performance of insurance companies in Kenya. The objectives of the research were to evaluate the effects of size, liquidity, leverage and diversification on the financial performance of insurance companies in Kenya. The research was guided by agency theory, trade-off theory, and the pecking order theory. This research problem adopted the use of a descriptive design. The target population was 53 insurance companies operating in Kenya. Secondary data of the period 2013-2017 obtained from insurance regulatory authority was used. The panel data collected was analyzed through descriptive and inferable statistics like multiple regression to find the effect between the predictor and predicted variables. Panel data analysis using STATA software was carried out. Diagnostic tests were carried out on the model. The results were presented using graphs, charts, and tables. The research established that the firm size had no significant effect on the financial performance of the insurance companies in Kenya. The study further established that liquidity positively affected the financial performance of the insurance companies in Kenya. The effect was however not significant. The effect of leverage on the financial performance was negative and significant. Finally, diversity negatively affected the financial performance of insurance companies in Kenya insignificantly. The study recommended that smaller firms should consider merging to reap from the economies of scale. The insurance companies should strengthen their liquidity to enhance their financial performance. Further, Insurance companies should keep low their debts and maximize their equity to enhance their financial performance. Lastly, insurance companies need to specialize of few products that will maximize their profitability.