Financial Risk and Financial Performance of listed Insurance Companies in Nigeria

Abstract

Financial risk if not properly taking care of in a business might lead to its collapse especially, insurance companies whose core business deals with day to day handling of risk, in light of this, the study examined the effect of financial risk on financial performance of listed insurance companies in Nigeria from 2009 to 2018. Population of the study consist of 27 listed insurance companies and a sample size of ( 19) firms. The study used secondary data obtained from annual report of the firms and Correlational design was used. Financial performance which is the dependent variable measured by return on asset (ROA) while independent variable are credit, liquidity and solvency risks. The results from the fixed effect regression proved that credit risk has negative and significant effect on financial performance, Liquidity risk has negative and insignificant effect on ROA and solvency risk has positive and significant effect on ROA. The study concludes that credit risk has adverse influence on ROA of listed insurance companies in Nigeria. The report advises that Nigerian insurance providers should do better to adequately control their receivable number by supplying their debtors with payment plans that are appropriate for servicing their outstanding debt or loan.

Risk Performance on Financial Assessment of Insurance Firms in Egypt

“…Arif A. Wani & Showket A. Dar [3] research findings, by using multiple linear regression model to investigate relationship between risks on financial performance, indicate that there is an insignificant relationship between them, also the study determined the important factors which have an effect on financial performance such as capital management risk size of firm, solvency risk, liquidity risk volume of firm, and underwriting risk in life insurance companies in India. Also, in line with this study, Ibrahim M. Fali & Lateef Olumide M. [8], by using linear regression model, concluded that insolvency risk has a positive significant relationship with return on asset, but there is a negative insignificant relationship between liquidity risks with return on asset of listed insurance companies in Nigeria. On the other hand, Kokobe SA& Gemechu D [12] used correlation matrix to investigate the relationship between risk management techniques; the study findings indicated that the risk management has an influence on financial performance measured by return on equity where risk management measured by (loss preventions and controlloss financing and risk avoidance) in insurance companies in Ethiopia.…”