Financial Risk and Financial Performance of listed Insurance Companies in Nigeria

Ibrahim Mallam Fali ,Terzungwe Nyor ,Lateef Olumide Mustapha

doi:10.7176/ejbm/12-12-13

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. Keywords: Financial Performance, Credit risk, Liquidity risk and Solvency risk DOI: 10.7176/EJBM/12-12-13 Publication date: April 30 th 2020

Highlights

From the current literature, it has been recognized that corporate organizations 'success has been one of the main concerns of creditors, stakeholders and scholars inside and outside the academic climate
This study found that solvency risk has positive and significant effect on return on asset (ROA) of the listed insurance firms in Nigeria
This study examined the effect of risk on financial performance of listed insurance companies in Nigeria for the period 2009 to 2018

Summary

Introduction

It has been recognized that corporate organizations 'success has been one of the main concerns of creditors, stakeholders and scholars inside and outside the academic climate. Most of the studies done in Nigeria have focused on risk management in banking sector (Olalekan, Mustapha & Irom, 2018 and Mustapha, Salam & Mohammed, 2017) but little studies have been carried out in insurance companies regarding financial risk. In view of the above, the following research hypotheses were developed for testing: H01 Credit risk has no significant effect on financial performance of listed insurance companies in Nigeria. Ho2 Liquidity risk has no significant effect on financial performance of listed insurance companies in Nigeria. The study would be significant in providing information to investors, government agencies, business professionals, accounting practitioners, regulators and the literature on financial risk and financial performance in insurance sector in Nigeria and in the world in general. The paper is divided into five parts to achieve this analysis, namely: section one is the introduction, section two takes up the examination of the literature, section three introduces the approach, section four deals with the findings and comments and section five ends the report

Literature Review

Results and Discussion

Discussion of findings

Conclusions and Recommendations