Abstract
The study is designed to identify the determinants of profitability in the insurance industry of
Pakistan. The panel data set of 41 insurance companies (life, non-life, and takaful insurance)
from 2007-2017 was employed. Hausman's specification and Breusch-Pagan Lagrange
multiplier (LM) tests have selected the most appropriate test i.e. fixed effect and pooled OLS
model for this study. The results of pooled OLS and fixed effect model reveal that insurance
specific and macroeconomic factor like leverage, business risk, and inflation rate are negative
but significantly affect the profitability of the insurance sector. However, size and GDP rate
has a positive and statistically significant influence on profitability. Liquidity and growth are
insignificant determinants of the study. This is the first study that covers the entire insurance
industry, which is also composed of the takaful industry, along with firm-specific and
country-specific attributes and applies the most suitable models for the study. Thus, this study
is very important for top-echelon and policy- makers of the insurance sector of Pakistan
regarding the profitability of the firm and wealth of the shareholders.
Shams Ur Rahman, Muhammad Farooq Jan, Khursheed Iqbal. (2018) Determinants of Profitability in Life and Non-Life Insurance Sector of Pakistan: An Endogenous and Exogenous Evaluation, Journal of Independent Studies and Research-Management, Social Sciences and Economics, Volume-16, Issue-2.
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