A critical examination of the effect of size on the profitability of insurance brokerage firms in Ghana

2023-07-29 06:22:35 Viewed: 1126 Downloads: 695
  • A critical examination of the effect of size on the profitability of insurance brokerage firms in Ghana

      Richard Angelous Kotey, Franklin Owusu-Sekyere and Daniel Asante Amponsah

     Publisher: African Review of Economics and Finance

    Pub: 2023-07-29 06:22:35

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  • This paper takes a critical look at the effect of firm size on the profitability of Ghanaian Insurance brokerage firms. Specifically, the paper examined the effect of firm size (measured by total assets) on firm profitability (measured by ROA and ROE) from a lagged perspective (i.e. the lagged effect of size), non-linear perspective, and across quantiles, using fixed effects, random effects, robust and PCSE estimation techniques. Analysing a unique data of 64 insurance brokers from 2007 to 2015, the findings show that firm size exhibited a significant and positive short term effect on firm profitability but the relationship turned negative in the long term showing a non-linear relationship of size on profitability, with an inflection point above the mean firm size. However, the non-linear effect was evident in the 50th and above percentile of brokers but not in the lower quantiles. The lagged values of size also significantly affected firm profitability but it was not as pronounced as the short term effects. The study recommends larger Ghanaian insurance brokerage firms take a staggered and reflective approach in its growth measures.

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  • Keywords

    Profitability; Size; Non-linear effect.


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