EFFECT OF OPERATIONAL AND INVESTMENT RISK ON THE VALUE CREATION OF LISTED INSURANCE COMPANIES IN NIGERIA

Abstract

Background: Insurance firm performance in Nigeria is shaped by financial risk dynamics and firm-specific characteristics such as size. Aims:This study examines the impact of financial risk variables on the market capitalisation of listed insurance companies in Nigeria, focusing on the moderating role of firm size. Methods: Panel regression techniques are employed, with diagnostic tests confirming the absence of multicollinearity, heteroscedasticity, and serial correlation. Lagged variables address endogeneity, while interaction terms capture firm size effects. A dynamic GMM model accounts for autocorrelation and temporal dynamics. Sample: The study uses firm-level data from listed Nigerian insurance companies. Results: Market capitalisation averages ₦5.06 billion with high variability. Claims Ratio (CR) positively and significantly affects market value, whereas Expense Ratio (ER) negatively affects it, indicating inefficiencies. Total Premiums Earned (TPE) enhances firm value, whereas Asset-Liability Ratio (ALR) and Loss Ratio (LR) show minimal influence. Firm size exhibits a positive moderating effect. The model is robust (Adjusted R² = 0.6708). Conclusions: Financial risk management, operational efficiency, and revenue growth are key drivers of firm value. Implications: Firms should improve cost efficiency and premium growth, while regulators and investors should emphasise risk management and firm size in decision-making.