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All Journal JURNAL EKONOMI DAN BISNIS AIRLANGGA
Olaiya, Kehinde Isiaq
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Economics, Econometrics & Finance

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EFFECT OF OPERATIONAL RISK ON THE PERFORMANCE OF LISTED INSURANCE COMPANIES IN NIGERIA Olaiya, Kehinde Isiaq; Akingunola, Richard Ore-Oluwa; Alao, Abdul-Azeez Adeniyi
Jurnal Ekonomi dan Bisnis Airlangga Vol. 35 No. 1 (2025): JURNAL EKONOMI DAN BISNIS AIRLANGGA
Publisher : Fakultas Ekonomi dan Bisnis, Universitas Airlangga

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.20473/jeba.V35I12025.66-82

Abstract

Introduction: This study examines the determinants of profitability, measured by Adjusted Risk-Adjusted Return on Capital (Adjusted RAROC), in the context of listed insurance companies in Nigeria. Methods: Using a panel data regression analysis, we employ four models: pooled regression, fixed effects, random effects, and Difference Generalized Method of Moments (D-GMM), to explore the impact of operational risk factors, including the claims ratio, expense ratio, leverage, and firm size, on Adjusted RAROC. Results: The results indicate that leverage and firm size play significant roles in profitability, with higher leverage associated with increased profitability in some models. Conversely, the claims ratio shows a negative relationship with profitability, highlighting the importance of effective risk management. The expense ratio also exhibits a negative impact on profitability, emphasizing the need for efficient cost control. The D-GMM model, which addresses endogeneity issues, reveals that past performance and firm size are crucial predictors of future profitability. Conclusion and suggestion: Overall, the findings suggest that operational efficiency, risk management, and strategic financial decisions are essential for improving profitability in the Nigerian insurance sector.
Co-Authors Akingunola, Richard Ore-Oluwa Alao, Abdul-Azeez Adeniyi