Effect of Firm Characteristics on Financial Performance of Insurance Firms in Kenya

Abstract

The purpose of this study was to investigate the influence of firm characteristics on the financial performance of insurance firms in Kenya. The study was anchored on agency theory. The research philosophy adopted was positivism while the correlation research design was adopted. The study used secondary data which was collected using data collection sheet from Insurance Regulatory Authority (IRA), Association of Kenya Insurers (AKI) and individual firms’ websites. The target population of the study was52 insurers that operated in Kenya for the ten years (2010-2018). The unbalanced panel data was analyzed using Random and Fixed effect model where Hausman test was used to establish to test the hypothesis. The study found that Equity Capital had a significant negative effect on financial performance while the Premiums had a positive and significant effect on the financial performance of insurance firms in Kenya. Besides, they should divert their focus towards increasing premium to enhance their financial performance.