Establishing the Relationship Between the Capital Structure, Intellectual Capital, and Financial Performance of SSA Insurance Companies

Thabiso Sthembiso Msomi (), Odunayo Magret Olarewaju and Mabutho Sibanda
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Thabiso Sthembiso Msomi: School of Accounting Economics and Finance, University of KwaZulu-Natal, Durban 4041, South Africa
Odunayo Magret Olarewaju: Department of Accounting, Metro State University, St. Paul, MN 55106, USA
Mabutho Sibanda: School of Accounting Economics and Finance, University of KwaZulu-Natal, Durban 4041, South Africa

JRFM, 2025, vol. 18, issue 9, 1-24

Abstract: This research examines the relationship between capital structure, intellectual capital, and financial performance among insurance companies in Sub-Saharan Africa (SSA). Anchored in a positivist paradigm, the study employed descriptive and quantitative methodologies, leveraging secondary panel data spanning from 2010 to 2022 across 122 insurance firms sampled from a population of 178 companies across 46 SSA countries. Utilizing a Panel Vector Error Correction Model (P-VECM), the analysis explored long-term equilibrium relationships and dynamic interactions among variables, including return on assets (ROAs), debt-to-equity ratio (DER), long-term debt (LTD), short-term debt (STD), Value-Added Intellectual Coefficient (VAIC™), and firm size (SIZE). Optimal lag lengths were determined through robust statistical criteria, ensuring model precision. The impulse response analysis revealed significant findings: variations in ROA negatively impacted intellectual capital (VAIC), leverage indicators (DER, LTD, and STD), and positively influenced firm size over a ten-period horizon. Specifically, decreases in ROA were consistently associated with reduced intellectual capital effectiveness and adverse financial liquidity conditions, while increased firm size correlated positively with improved financial performance.

Keywords: capital structure; intellectual capital; insurance companies; Sub-Saharan Africa; panel data; P-VECM; ROA; VAIC™ (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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