IMPACT OF UNDERWRITING RISK ON MARKET CAPITALIZATION OF LISTED INSURANCE COMPANIES IN NIGERIA: THE MODERATING ROLE OF COMPANY SIZE, LEVERAGE AND PROFITABILITY
IMPACT OF UNDERWRITING RISK ON MARKET CAPITALIZATION OF LISTED INSURANCE COMPANIES IN NIGERIA: THE MODERATING ROLE OF COMPANY SIZE, LEVERAGE AND PROFITABILITY

Summary/Abstract: This study investigates the relationships between market capitalization, financial performance metrics, risk indicators, and firm size using three econometric models: Pooled Ordinary Least Squares (OLS), Fixed Effects (FE), and Dynamic Generalized Method of Moments (DGMM). The results reveal that lagged market capitalization exhibits a positive and highly significant relationship across all models, highlighting its persistence and alignment with financial path dependency theory. Firm size consistently emerges as a critical determinant, positively and significantly influencing the dependent variable in all models. Conversely, financial performance metrics such as ROA and ROE show no significant effects, indicating limited direct relevance within this context. Risk indicators, including the Claims Ratio and Combined Ratio, yield mixed results, with marginal significance in specific models but inconsistent robustness overall. Leverage displays a borderline significant negative effect under dynamic conditions in the DGMM model, suggesting a nuanced relationship. Among the models, the Fixed Effects approach provides the best fit, while DGMM captures dynamic adjustments with weaker explanatory power. Key recommendations include focusing on strategies to enhance firm size, strengthening market capitalization through improved governance and investor confidence, and refining risk management practices to optimize key metrics. Firms are also advised to maintain balanced leverage levels to mitigate potential negative impacts. Future research should incorporate macroeconomic and industry-specific factors to offer a more comprehensive analysis of the determinants influencing market capitalization and firm performance.

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