Macroeconomic And Firm-Specific Determinants Of Profitability Of Insurance Companies In Ethiopia: Panel Data Analysis

Abstract

The macroeconomic and firm-specific factors determining the profitability of Ethiopian insurance companies were the subjects of the study. The study looks at the effects of macroeconomic variables like GDP and inflation, as well as firm-specific factors like company size and liquidity ratio, on the profitability of the Ethiopian insurance sector. The study employed a mixed research approach to accomplish this study. Nine insurance companies' worth of panel data from 2014 to 2023 is examined. The study's conclusions demonstrated a statistically significant and positive relation between insurers' profitability and company size, liquidity ratio, and inflation and GDP have a significant negative effect on insurer’s profitability. In order to greatly boost their profitability, the study advises managers of Ethiopian insurance companies to take into account factors like company size, inflation, and liquidity ratio and encouraged to focus on growth and expansion, scaling up operations, maintain optimal liquidity level, regularly monitor liquidity ratios, introduce index features, focusing on market segments, diversify offerings life and non-life insurance products which can help stabilize revenue streams during periods of economic expansion or contraction and future research could explore additional areas, such as the effectiveness of insurance companies in risk indemnification and savings intermediation.