The effect of liquidity risk management on companies performance; evidence from general insurance companies in Ghana

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The main aim of this study relates to investigating the effect of liquidity risk management on financial outcomes of general insurance companies in Ghana. Drawing on historical data for 15 enterprises from 2009 to 2018 from the NIC database, the study pursues fixed effect approach to panel data analysis, and produces striking outcomes. The study found that liquidity risk (premium growth ratio and leverage risk) management consequentially poses major effect in determining ROA and ROE of insurance corporations in Ghana. The study also found liquidity risk (leverage risk and premium growth) management had a positive significant effect on insurers’ return on investment. The mixed findings for the consequences of various proxies for liquidity risk on financial outcomes of insurers come with a number of implications. The positive impact of liquidity risk management on ROA, ROE and investment yield implies the need for firms not to think of reinsurance in isolation, but consider it in association with investments. The study concludes that managing liquidity risk is beneficial to the financial performance of insurance companies in Ghana. The study recommends policymakers and regulators must initiate, design and model regulations such that they help tame risk to improve the performance of insurers in Ghana given that the present state of required capital.
A thesis submitted to the department of accounting and finance college of humanities and social sciences, in partial fulfilment of the requirements for the degree of master of science (finance)