Determinants of capital structure: a study on Ethiopian insurance companies

Abstract

This thesis is designed to investigate Capital structure determinants towards Ethiopian Insurance Industry. Thus, the major aim of this research was to investigate firm specific factors such as, Asset Tangibility, Liquidity, Risk, Growth Opportunity, Profitability and Age of the firm were impact on Ethiopian insurance companies. The panel data was used in this study to achieve the research objectives. In this study, the researcher used only secondary data. To accomplish this study, all insurance companies were included in the sample frame those had audited annual reports of seven years. In order to accomplish these issues a quantitative research approach is utilized by documentary analysis and the study uses seven (2008 up to 2014) years data for all Insurance Companies those have full audited financial statements for seven consecutive years This study applied panel or longitudinal data model with its fixed effect estimate regression to test a series of the hypotheses that organized through the review of existing literature. Then the data collected were analyzed by using: correlation and Ordinary least square model After regression, the finding result shows that Asset Tangibility, Liquidity, Growth Opportunity and Business Risk were direct or Positive relation with Leverage level; while the remaining two variables (Profitability and Age of the firm) have negative relation with Leverage of Ethiopian Insurance Industry. Among of the six variables, only three variables (Asset tangibility has significant positive relation and both Profitability and Age of the firm were significant negative impact)on Ethiopian Insurance Companies and the remaining three variables (Liquidity, growth opportunity and business risk) found no significant effect on Capital structure determinants on Ethiopian Insurance Companies.