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Financial distress and its determinants: Evidence from insurance companies in Ethiopia

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  • Yonas Nigussie Isayas

Abstract

This research is aimed to investigate the determinants of financial distress of insurance companies in Ethiopia using balanced panel data from eleven insurance companies for the period covering from 2008 to 2019. A quantitative approach and explanatory design were employed to realize the stated objectives. To achieve the study objectives, secondary data were collected from annual financial statements of sampled insurance companies for the stated period and analyzed using descriptive statistics and a random effect (RE) regression model. The descriptive statistics output of the study revealed that sampled insurance companies are in the safe zone. The RE regression model results show that profitability, firm size, leverage, and company age were negatively correlated to financial distress having a strong negative effect on financial distress. On the other hand, asset tangibility and loss ratio have a positive and statistically significant effect on insurance companies’ financial distress. Based on the analysis of findings, the study suggests that Insurance Companies in Ethiopia shall be more concerned about the internal environment (factors) while developing policies and strategies to manage the financial distress condition.

Suggested Citation

  • Yonas Nigussie Isayas, 2021. "Financial distress and its determinants: Evidence from insurance companies in Ethiopia," Cogent Business & Management, Taylor & Francis Journals, vol. 8(1), pages 1951110-195, January.
    • Handle: RePEc:taf:oabmxx:v:8:y:2021:i:1:p:1951110
    DOI: 10.1080/23311975.2021.1951110
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    Cited by:

    1. Vuong, Giang Thi Huong & Nguyen, Phuc Van & Barky, Walid & Nguyen, Manh Huu, 2024. "Stock return volatility and financial distress: Moderating roles of ownership structure, managerial ability, and financial constraints," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 634-652.
    2. Sadia Rashid & Kanwal Iqbal Khan & Adeel Nasir & Tayyiba Rashid, 2022. "Unveiling living dead: characteristics and consequences of zombie firms," Cogent Business & Management, Taylor & Francis Journals, vol. 9(1), pages 2121240-212, December.
    3. Geoffrey Ngetich Iletaach & Dr. Penina Langat & Dr. Gichuki Kingori, 2024. "Assessing the Impact of Asset Quality on Financial Performance: A Study of Kenyan Deposit Taking SACCOs," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(8), pages 2479-2492, August.

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