The moderating role of diversity of products between the nexus of market concentration toward financial performance: a study in an emerging market

Mohannad Almajali and W. Muhammad Zainuddin Wan Abdullah

Afro-Asian Journal of Finance and Accounting, 2024, vol. 14, issue 5, 668-683

Abstract: This paper examines the influence of market concentration on the financial performance of Jordanian insurance companies, considering the potential moderating effect of product diversity. The motivation for this study arises from the observation that insurance companies in Jordan operate within a highly concentrated market, with a predominant focus on car insurance. A panel data analysis was conducted using data from 20 insurance companies during the period from 2005 to 2020. The fixed-effects regression models revealed a significant positive relationship between market share and performance, while a negative relationship existed between the concentration ratio and performance. The findings suggest that market concentration can have both positive and negative effects on financial performance, depending on a firm's product diversity. Greater product diversification enhances the positive impact of market share on performance, serving as a risk mitigation strategy. This study recommends prioritising product diversification as a strategic approach to reduce financial risks.

Keywords: insurance company; financial performance; market concentration; diversity of products. (search for similar items in EconPapers)
Date: 2024
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