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Studies on Economic Development and Growth in Selected African CountriesFirm-Specific Determinants of Insurance Companies’ Capital Structure in Ethiopia

Studies on Economic Development and Growth in Selected African Countries: Firm-Specific... [This study examines the impact of firm-specificFirm-specific effects characteristics on capital structureCapital structure (CS) decisions of the Ethiopian insurance industry. The study used panel-fixed effects robust standard error regression models, the DEBT model, and the DE model using financial statements of eight insurance companiesInsurance companies covering the period from 2005 to 2014. To validate the results, it conducted normality, multi-collinearity, heteroskedasticityHeteroskedasticity, autocorrelationAuto-correlation, and robustness tests. We found pecking order, static trade-off, and agency cost theories as the most important in explaining CSCapital structure decisions of insurance companiesInsurance companies in Ethiopia though the pecking order theoryPecking order theory appeared to be dominant. The empirical findings of the models indicate that profitabilityProfitability and liquidityLiquidity are significant in determining Ethiopian insurance companiesInsurance companies’ financing decisions, while business riskBusiness risk and size of the firm are insignificant in shaping their behavior. On the other hand, firms’ asset tangibilityTangibility and growth opportunities had a significant impact on the total debt ratio, while these factors were insignificant for the debt–equity ratio.] http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png

Studies on Economic Development and Growth in Selected African CountriesFirm-Specific Determinants of Insurance Companies’ Capital Structure in Ethiopia

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/lp/springer-journals/studies-on-economic-development-and-growth-in-selected-african-cy30ST4SD7
Publisher
Springer Singapore
Copyright
© Springer Nature Singapore Pte Ltd. 2017
ISBN
978-981-10-4450-2
Pages
155 –175
DOI
10.1007/978-981-10-4451-9_8
Publisher site
See Chapter on Publisher Site

Abstract

[This study examines the impact of firm-specificFirm-specific effects characteristics on capital structureCapital structure (CS) decisions of the Ethiopian insurance industry. The study used panel-fixed effects robust standard error regression models, the DEBT model, and the DE model using financial statements of eight insurance companiesInsurance companies covering the period from 2005 to 2014. To validate the results, it conducted normality, multi-collinearity, heteroskedasticityHeteroskedasticity, autocorrelationAuto-correlation, and robustness tests. We found pecking order, static trade-off, and agency cost theories as the most important in explaining CSCapital structure decisions of insurance companiesInsurance companies in Ethiopia though the pecking order theoryPecking order theory appeared to be dominant. The empirical findings of the models indicate that profitabilityProfitability and liquidityLiquidity are significant in determining Ethiopian insurance companiesInsurance companies’ financing decisions, while business riskBusiness risk and size of the firm are insignificant in shaping their behavior. On the other hand, firms’ asset tangibilityTangibility and growth opportunities had a significant impact on the total debt ratio, while these factors were insignificant for the debt–equity ratio.]

Published: May 3, 2017

Keywords: Ethiopia; Capital structure; Firm-specific; Insurance; Leverage

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