Evaluation Of Factors Affecting Post Merger Financial Performance Of Insurance Companies In Kenya

Abstract

Insurance Companies mergers play a vital role in insurance industry corporate finance by enabling firms achieves varied objectives and financial strategy. In Kenya, insurance companies have been merging with the goal of improving their overall financial performance. Studies done on mergers have not conclusively established whether or not insurance companies in Kenya benefit from mergers. Most studies have observed that insurance companies’ mergers did not lead to an improvement in financial performance as indicated in their profitability and earnings ratios. This study sought to discover, identify and uncover how change management, culture integration, personnel management and management integration are likely to influence the financial performance of the merged insurance firms in Kenya. Therefore a structured literature review was conducted to identify relevant theoretical and empirical evidence where merged insurance companies financial performance and its dependencies of change management, culture, personnel management and management integration are discussed. A conceptual framework was formulated evolving around the dependent variable of financial performance of merged insurance companies and the independent variables of change management, culture, personnel management and management integration. The theories utilized were the Production theory, market imperfection theory, differential efficiency theory, synergy, pure diversification and hubris hypothesis. The study employed a descriptive research design. The target population of this study was CEO, CFO, Strategic managers and Project managers of 15 merged insurance companies in Kenya between 2002 and 2017. The study employed a purposive sampling procedure in coming up with a sample size of 100 respondents. The study generated quantitative data where quantitative data was coded and entered into statistical packages for social sciences (SPSS Version 17.0) and analyzed using descriptive statistics. The study utilized a questionnaire distributed through drop and picked later method. The study found that most (74%) of the respondents were male and (26%) were female. Additionally, 58% of the respondents were graduate students. The study found a positive and significant relationship between all independent variables and the dependent variable. Personnel integration had the most significant impact on financial performance of merged insurance, followed by culture integration, management integration and change management. This study discussed the theoretical significance and adds to the literature on mergers of insurance companies in Kenya. The study concluded by recommending that organisations should consider change management, culture, management integration and personnel management since it positively influences the financial performance of insurance companies.