Abstract:
ABSTRACT
The existing literature on drivers of performance have been tilted toward non financial corporations with the few in emerging economies that looked at
financial institutions focusing on banking, yet the insurance industry is one of the
major contributors to the Gross Domestic Product of Ghana and the role
insurance plays in sustaining economic growth and development cannot be
overemphasised due to the inevitability of risks and uncertainties associated with
modern economies and businesses. In this study, the resource-based, agency and
life cycle theories were employed to ascertain the determinants of performance
of both life and non-life insurance firms in Ghana. The study in addition
evaluated the likelihood of performance persistence in the insurance industry in
Ghana. The study employed panel data of forty (40) insurance firms over a six year period from 2012-2017. The study relied on the two-step System
Generalised Method of Moments technique to examine the determinants of
financial performance. The findings of study confirmed the dynamic nature of
insurance firms’ financial performance and revealed that cost efficiency, claims
ratio, retention ratio, audit fees, board size and independence and firm size are
the most vital determinants of performance of life insurance firms in Ghana
whereas claims ratio, cost efficiency, firm age and firm size are the determinants
of performance for non-life insurance firms in Ghana. The study recommends
that insurance firms should resort to cost control strategies such as activity-based
costing to track and control overhead costs. Besides, the study recommends that
managers of non-life insurance firms should cut down investments in long term
tangible assets such land and building due to the inverse association discovered
between firm size and performance.
