Effect of Recapitalization on Financial Performance of Insurance Companies in Nigeria

Abstract

The study assessed effect of recapitalization on financial performance of Insurance Companies in Nigeria. Specifically, the study set out to determine whether the shareholders fund has any significant effect on the turnover of insurance companies and to ascertain whether shareholders fund has significant effect the profitability of insurance companies.  Ex-post facto research design was adopted. The study was anchored on value increasing theory. A sample of 14 insurance companies was purposively selected from a population of 29 insurance companies listed on the Nigerian Stock Exchange market. Annual time series data were obtained for the variables and the parameters of the model were estimated by means of Ordinary Least Squares (OLS) method of econometric regression with emphasis on Chow Test of structural stability.  The Findings from the investigation showed that the insurance companies’ recapitalization has no significant effect on the Companies turnover and profitability.  The implication is that recapitalization programme has made insurance companies to be more adequately capitalized and less risky, but has no significant effect on the variables of turnover and profitability. The study recommended that insurance companies’ management should improve on their management efficiency in order to record improvement in the insurance companies’ profitability. This will translate to stabilize the insurance industry and eventually result to maximization of the shareholders’ wealth.