| dc.description.abstract | Insurance makes a noteworthy contribution to financial development and improvement of
the economy and is a vital part in cultivating business investment and infrastructural
progression and expansion. Insurance facilitates economic dealings by providing
indemnification and risk transfer. It also encourages management of risks while
promoting safe practices in business transactions, encourages financial steadiness by
offering long-lasting investment in the economy. Insurance also stimulates steady and
viable savings and in provision of pension. The performance of insurance is, therefore, a
critical component that warrants attention. In light of the above preceding, the foundation
of the study was to evaluate the effects of firm characteristics on the performance of
insurance companies in Kenya. The objectives of the research were to evaluate the effects
of size, liquidity, leverage and diversification on the financial performance of insurance
companies in Kenya. The research was guided by agency theory, trade-off theory, and the
pecking order theory. This research problem adopted the use of a descriptive design. The
target population was 53 insurance companies operating in Kenya. Secondary data of the
period 2013-2017 obtained from insurance regulatory authority was used. The panel data
collected was analyzed through descriptive and inferable statistics like multiple
regression to find the effect between the predictor and predicted variables. Panel data
analysis using STATA software was carried out. Diagnostic tests were carried out on the
model. The results were presented using graphs, charts, and tables. The research
established that the firm size had no significant effect on the financial performance of the
insurance companies in Kenya. The study further established that liquidity positively
affected the financial performance of the insurance companies in Kenya. The effect was
however not significant. The effect of leverage on the financial performance was negative
and significant. Finally, diversity negatively affected the financial performance of
insurance companies in Kenya insignificantly. The study recommended that smaller firms
should consider merging to reap from the economies of scale. The insurance companies
should strengthen their liquidity to enhance their financial performance. Further,
Insurance companies should keep low their debts and maximize their equity to enhance
their financial performance. Lastly, insurance companies need to specialize of few
products that will maximize their profitability. | en_US |
