Effect of Management Soundness on the Financial Performance of Insurance Companies in Kenya
DOI:
https://doi.org/10.70641/ajbds.v1i1.68Keywords:
Financial Performance, Insurance Companies, Kenya, Management SoundnessAbstract
The purpose of the study was to assess the effect of management soundness on the profitability of insurance companies in Kenya. The study was anchored on the CARAMELS model that was advanced by the International Monetary Fund for insurance companies in sub-Saharan Africa. This study used a positivism philosophy, and a descriptive research design and targeted a total of 56 insurance companies. The study used secondary data for 15 years from 2008 to 2022 drawn from the company’s financial statements and the Insurance Regulatory Authority industry publications. The gathered quantitative data was analyzed by use of descriptive statistics (percentages, frequencies, mean and standard deviation), and a balanced dynamic panel data regression model. Before conducting the panel regression analysis, diagnostic tests to assess stationarity, linearity test, serial correlation, normality of residuals, and homoscedasticity tests were done. The study included 41 insurance companies that satisfied the inclusion criterion. The research findings determined that management soundness had a significant positive effect on the financial performance of insurance companies in Kenya (β = 0.2128, t = 2.95, p = 0.001). The research concluded that management soundness was instrumental in the financial performance of insurance companies in Kenya. The study findings have implications for management and policymakers to nurture a culture of competence and ethical leadership in insurance companies.
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