Factors Affecting Financial Performance of Insurance Companies of Nepal

Abstract

The purpose of this study has to investigate the factors (size, leverage, liquidity and age) that influence the financial performance of insurance companies in Nepal. The study has analyzed over a seven-year period from 2010/11-2016/17 of 12 insurance companies in Nepal. This study has used connivance-sampling method to select the companies. Statistical Package for Social Sciences (SPSS) and excel applications has utilized to describe the data and determine the extent used and this has through descriptive analysis of means, standard deviations, and CV. inferior research design has utilized via regression analysis to determine the relation between the dependent variable and the independent factors. The information has displayed by use of tables and graphs. In correlation Analysis, there is negative correlation between SIZE and liquid Ratio with ROA & ROE and statistically significant at 0.05 level with 2-tailed test. There is Positive between LEV with ROA & ROE and statistically significant at 0.05 level with 2-tailed test. There is Positive correlation between AGE with ROA & ROE and statistically insignificant at 0.05 level with 2-tailed test. In Multiple regression, the coefficient of multiple shows ROA and ROE are influenced by the joint effect of AGE, Liquid, SIZE, LEV where R2 of ROA and ROE are 0.239 and 0.237 respectively. It means that the dependent variable higher predicted with less error from the independent variable than multiple regression that is about 76.1% and 76.3% of the variations in ROA and ROE of sample companies are accounted for by other factors not capture by the model. The independent variables (AGE, Liquid, SIZE, and LEVERAGE) are significant in explaining the variance in firms’ performance in Nepal. In others words a P-value that is almost equal to 0.000 (p-value=0.000) in ROA and ROE. This invariably suggests clearly that simultaneously the explanatory variables are significantly associated with the dependent variable. Hence, Liquidity, Size and Leverage of insurance companies significantly affect to performance of insurance companies. So these factors should analyze carefully to improve the performance of companies.