CAPITAL STRUCTURE AND THE PERFORMANCE OF QUOTED INSURANCE INDUSTRY IN NIGERIA

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Abstract

The study examined the pattern of debt and equity on the financial performance of twenty-nine (29) listed insurance firms in Nigeria between 2006 and 2014. Secondary data were employed and sourced from the Nigerian Stock Exchange Factbook and the audited annual report of the selected insurance companies. Data were sourced on the variables such as return on assets, leverage (capital structure) and other control variables, and data were analyzed using graphs, percentage, trend analysis and random effect model based on the outcome of LM-test and Hausman test. The empirical results lent some support to the pecking order and static trade-off theories of capital structure. The study revealed that capital structure (LEV) had significant negative effect on the financial performance of insurance companies in Nigeria. This implies that, the higher the debt relative to equity, the lower the performance of the insurance company financially. Thus, to improve the level of financial performance, the debt components of the capital structure should be reduced. The study recommended that insurance firms should try to increase the percentage of retained earnings in order to reduce the reliance on debt to finance the business.
Published
2019-05-20
How to Cite
, admin. CAPITAL STRUCTURE AND THE PERFORMANCE OF QUOTED INSURANCE INDUSTRY IN NIGERIA. GOUNI Journal of Management and Social Sciences, [S.l.], v. 6, n. 1, p. 57-75, may 2019. ISSN 2550-7265. Available at: <http://journal.gouni.edu.ng/index.php/fmss/article/view/102>. Date accessed: 19 june 2019.