Determinants of Investment Yield of Insurance Firms in Pakistan

Abstract

Insurance sector stands strategically important in terms of risk management for the economy. Growth of the insurance sector correlates with economic growth of an economy. Investment yield stands among core goals of firms in the market. The study has investigated the determinants of investment yield of insurance companies in Pakistan based on a panel data of 37 insurance firms (life insurance and non-life insurance) listed in Pakistan Stock Exchange (PSX) covering the period from 2015-2019. Specifically, this study examines the effects of financial leverage, gross GDP growth, inflation rate, risk capital management, size of the firm, age of the firm, tangibility and solvency margins on financial performance of firms in the Insurance sector. The data was obtained from financial publications of State Bank of Pakistan (SBP) and Insurance Year Book that was published by Insurance Association of Pakistan (IAP). The findings of pooled ordinary least square (OLS) regression analysis reveal that financial leverage, GDP growth, inflation rate, risk capital management, size of firm, age of the firm and solvency margins are important determinants of investment yield of insurance firms while tangibility is identified as insignificant determinant of investment yield of insurance firms in the country.