Does Consolidation Have any Effect on the Operational Efficiency in Nigerian Insurance Firms?

• Main Authors: Michael Oke, Mojisola Abere
• Format: Article
• Language: English
• Published: Danubius University 2019-08-01
• Series: Acta Universitatis Danubius: Oeconomica
• Subjects: consolidation; operational efficiency; composite insurance; recapitalization
• Online Access: http://journals.univ-danubius.ro/index.php/oeconomica/article/view/5803/5089

The effect of consolidation on the operational efficiency in Nigerian insurance firms is being assessed in this study. The model of the study was underpinned by the regulatory and efficient market monitoring hypothesis. The secondary data were gotten from the financial statements of the insurance firms. This study covered the period of years between 2009 and 2016. The Pooled Least Square Method, Fixed Effect Model, Random Effect Model and Hausman Test were employed as the estimation techniques. The results of the Random Effect Model showed that capital base is positively significant, while total assets have negative and insignificant effect on operational efficiency. In addition, liquidity and total premium have positive and insignificant effect on operational efficiency. Based on the findings of the study, it is suggested that Nigerian insurance firms should consider assets reconstruction. They should also ensure that the total premium received is optimally employed in income generating assets. In addition, the liquid assets, especially cash, should be invested where interests would be earned while the cash remains easily accessible. Overall, consolidation exerts a significant positive effect on the operational efficiency of Nigerian insurance firms because the capital base is the most important element of the consolidation exercise.