Academic journal article Journal of Management Research

Factors Affecting the Financial Performance of Jordanian Insurance Companies Listed at Amman Stock Exchange

Academic journal article Journal of Management Research

Factors Affecting the Financial Performance of Jordanian Insurance Companies Listed at Amman Stock Exchange

Article excerpt

Abstract

This study aimed at investigating the factors that mostly affect financial performance of Jordanian Insurance Companies. The study population consisted of all insurance companies' enlisted at Amman stock Exchange during the period (2002-2007) which count (25) insurance company. The data collected was analysed by using a number of basic statistical techniques such as T-test and Multiple- regression. The results showed that the following variables (Leverage, liquidity, Size, Management competence index) have a positive statistical effect on the financial performance of Jordanian Insurance Companies. The researcher recommended that a high consideration of increasing the company assets will lead to a good financial performance and there is a significant need to have highly qualified employees in the top managerial staff.

Keywords: Financial performance, Stock exchange, Factors affecting.

1. Introduction

Company performance is very essential to management as it is an outcome which has been achieved by an individual or a group of individuals in an organization related to its authority and responsibility in achieving the goal legally, not against the law, and conforming to the morale and ethic.

Performance is the function of the ability of an organization to gain and manage the resources in several different ways to develop competitive advantage (Iswatia, & Anshoria, 2007). There are two kinds of performance, financial performance and non-financial performance. Financial performance emphasizes on variables related directly to financial report. Company's performance is evaluated in three dimensions. The first dimension is company's productivity, or processing inputs into outputs efficiently. The second is profitability dimension, or the level of which company's earning are bigger than its costs. The third dimension is market premium, or the level of which company's market value is exceeding its book value (Walker, 2001)

Performance is a difficult concept, in terms of both definition and measurement. It has been defined as the result of activity, and the appropriate measure selected to assess corporate performance is considered to depend on the type of organization to be evaluated, and the objectives to be achieved through that evaluation. Researchers in the strategic management field have offered a variety of models for analyzing financial performance. However, little consensus has emerged on what constitutes a valid set of performance criteria. For instance, researchers have suggested that studies on financial performance should include multiple criteria analysis. This multidimensional view of performance implies that different models or patterns of relationship between corporate performance and its determinants will emerge to demonstrate the various sets of relationships between dependent and independent variables in the estimated models(Ostroffand Schmidt, 1993)

2. Statement of the Problem

The subject of financial performance has received significant attention from scholars in the various areas of business and strategic management. It has also been the primary concern of business practitioners in all types of organizations since financial performance has implications to organization's health and ultimately its survival. High performance reflects management effectiveness and efficiency in making use of company's resources and this in turn contributes to the country's economy at large. (Naser, and Mokhtar, 2004)

In Jordan there was a good performance of many sectors such as banking sector, the insurance sector didn't react to the growth of Jordanian economy. The overall financial performance of insurance companies in Jordan is somehow weak expect for some companies which accomplished some revenues. This study tries to investigate the weakness in the overall financial performance of insurance companies. The study's main objective then could be summarized in identifying the factors affecting Jordanian insurance companies' financial performance. …

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