Assessment of the Impact of Recapitalization on Share Prices and Liquidity of Insurance Companies in Nigeria

Abstract

The study assessed the impact of recapitalization on Share Prices and Liquidity of the Insurance companies in Nigeria. Specifically, the study set out to ascertain the extent at which the shareholders fund has significantly affected the share prices of insurance companies and to determine whether the shareholders fund has any significant impact on the liquidity of insurance companies. The Ex-post facto research design was adopted. The study was anchored on value increasing theory. A sample of 14 insurance companies was purposely selected from a population of 29 insurance companies listed on the Nigeria Stock Exchange. 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 the Chow Test of structural stability. Findings from the data and hypothesis testing show that the insurance companies’ recapitalization has significant positive impact on the insurance companies quoted share prices. The implication is that recapitalization programme has made insurance companies to be more adequately capitalized and less risky after the programme. The study recommended that the increase in the insurance company liquidity after recapitalization should be invested in such a way that it adds value to the shareholders’ wealth.