Unveiling dynamics: Financial performance determinants in the Ghanaian insurance industry

Ezekiel Kofi Opoku, Edward Marfo-Yiadom, Mariya Gubareva and José Zorro Mendes

The Quarterly Review of Economics and Finance, 2024, vol. 98, issue C

Abstract: This pioneering study unravels the financial performance dynamics of Ghanaian insurance firms, leveraging proprietary data from the National Insurance Company (NIC), Ghana. Utilizing a system GMM technique on a comprehensive panel dataset of 40 firms from 2012 to 2017, it uncovers cost efficiency, claims ratio, retention ratio, audit fees, firm age and size, and board composition as crucial performance drivers. In what concerns the implications for the emerging economies, we show that the inclusion of the variable “risk retention and claims” helps insurance companies to better ascertain the right level of risks associated with the businesses they underwrite, so that the claims ratio will be minimized, and the appropriate premium ensured. Moreover, for the insurance sector in the frontier markets, with characteristics like Ghana´s economy, the study advocates for strategic cost control measures and emphasizes the need for proactive regulatory approaches aiming to enhance policy actions and to provide supplementary funds for firms demonstrating growth potential. These empirical evidence-based insights help design a roadmap for developing the insurance sector in the economies belonging to frontier and emerging markets.

Keywords: Financial performance; Life insurance firms; Non-life insurance firms; Generalized method of moments (search for similar items in EconPapers)
JEL-codes: G22 G23 G28 G29 H12 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:98:y:2024:i:c:s1062976924001418

DOI: 10.1016/j.qref.2024.101935

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