THE EFFECTS OF CREDIT RISK, OPERATIONAL RISK AND LIQUIDITY RISK ON THE FINANCIAL PERFORMANCE OF INSURANCE COMPANIES LISTED AT KUWAIT STOCK EXCHANGE

Sundus K. Al-Yatama, Musaed S. Al Ali, Khuloud M. Al Awadhi, Nour M. Al Shamali

Abstract


This aim of this study to shed some light of the effect of risk factors on the financial performance of insurance companies listed at Kuwait stock exchange (KSE) over the period 2009-2017. The research uses credit, operational and liquidity risk as independent variables and return on assets (ROA) and return on equity (ROE) as dependent variables. Results obtained from this study showed that the financial performance of Kuwaiti insurance companies are mostly affected by operational risk and credit risk while liquidity risk does not have any statistical significant effect on their financial performance.

 

JEL: L10; L25; G32; G22

 

Article visualizations:

Hit counter

DOI

Keywords


insurance companies, Kuwait stock exchange, operational risk, credit risk, liquidity risk, return on assets, return on equity, financial performance

Full Text:

PDF

References


Abu Hussain, H., and Al-Ajmi, J. (2012). Risk management practices of conventional and Islamic banks in Bahrain. The Journal of Risk Finance, 13 (3), 215-239.

Al-Tamimi, H., Hussein, A., Miniaoui, H., and Elkelish, W.W. (2015). Financial risk and Islamic banks’ performance in the Gulf Cooperation Council Countries. The International Journal of Business and Finance Research, 9 (5), 103-112.

Aruwa, S. A., and Musa, A. O. (2014). Risk components and the financial performance of deposit money banks in Nigeria. International Journal of Social Sciences and Entrepreneurship, 1 (11), 514-522.

Beck, T. and Webb, I. (2003). Economic, demographic and institutional determinants of life insurance consumption across countries. The World Bank Economic Review, 17 (1), 51-88.

Bessis, J. (1999). Risk Management in Banking, John Wiley & Sons, New York, USA.

Crouhy, M., Galai, D. and Mark, R. (2000). A comparative analysis of current credit risk models. Journal of Banking & Finance, 24 (1–2), 59–117.

Cummins, J. D., Lewis, C. M., and Wei, R. (2006). The market value impact of operational loss events for US banks and insurers. Journal of Banking & Finance, 30 (10), 2605-2634.

Elbahar, E. (2016). Corporate governance, risk management, and bank performance in the GCC banking sector. Doctoral Dissertation, University of Plymouth.

Elviani, Sri (2012). The Influence of Credit Risk Provided and Liquidity Level of Profitability of Banking Companies Listed In Indonesia Stock Exchange. Indonesian Scientific Journal, 1, 971 -1000.

Froot, K. A. (2007). Risk management, capital budgeting, and capital structure policy for insurers and reinsurers. Journal of Risk and Insurance, 74 (2), 273-299.

Hakim, S., and Neaime, S. (2001). Performance & credit risk in banking: A comparative study for Egypt and Lebanon. Working Paper.

Hertrich M. (2015). Does credit risk impact liquidity risk? Evidence from credit default swap markets. International Journal of Applied Economics, 12 (2), 1–46.

Jiang, C., Feng, G., and Zhang, J. (2012). Corporate governance and bank performance in China. Journal of Chinese Economic and Business Studies, 10 (2), 131-146.

Klein, A. (1998). Firm performance and board committee structure. The Journal of Law and Economics, 41 (1), 275-304.

Koller, M. (2011). Life Insurance Risk Management Essentials. Springer Science and Business Media. USA.

Malik, H. (2011). Determinants of Insurance Companies Profitability: An Analysis of Insurance Sector of Pakistan. Academic Research International, 1 (3), 315-321, November, Available at www.journals.savap.org.pk.

Merton, R. C., and Perold, A. (1993). Theory of risk capital in financial firms. Journal of Applied Corporate Finance, 6 (3), 16-32.

Miller, S. M., and Noulas, A.G. (1997). Portfolio mix and large-bank profitability in the USA. Applied Economics, 29 (4), 505-512.

Naveed A., Zulfqar A., and Ahmad U. (2011). Determinants of Performance: A Case Of Life Insurance Sector of Pakistan, International Research Journal of Finance and Economics, Eurojournals Publishing, Inc. 2011 Available at http://www.eurojournals.com/finance.htm

Sayedi, S.N. (2014). Impacts of internal and external factors on profitability of banks in Nigeria. International Journal of Social Sciences and Entrepreneurship, 1 (9), 1-21.

Syaharman, S. (2012). The effect of credit amount provided and liquidity rate of the banking company's profitability listed on the Indonesia Stock Exchange. Indonesian scientific journal, 4 (2), 895 – 904.

Sutrisno, S. (2016). Risk, efficiency and performance at conventional banks in Indonesia. Journal of Accounting and Business Sciences, 11 (2), 35-47.

Tabari, N. A. Y., Ahmadi, M., and Emami, M. (2013). The effect of liquidity risk on the performance of commercial banks. International Research Journal of Applied and Basic Sciences, 4 (6), 1624-1631.

Tafti, A., Mithas, S., and Krishnan, M. S. (2013). The Effect of Information Technology- Enabled Flexibility on Formation and Market Value of Alliances. Management Science, 59 (1), 207-225.

Tandelilin, E., Kaaro, H., and Mahadwartha, P.A. (2007). Corporate governance, risk management and bank performance: Does type of ownership matter. EADN Individual Research Grant Project, 34, 115-118.

Van Greuning, H., and Brajovic-Bratanovic, S. (2009). Analyzing banking risk: A framework for assessing corporate governance and risk management. World Bank Publications.

Wadhwa, B. (2019). Financial ratios: The precarious core of fundamental analysis. Frontiers Journal of Accounting and Business Research, 1 (1), 33-35.

Zeitun, R., and Benjelloun, H. (2013). The efficiency of banks and the financial crisis in a developing economy: The case of Jordan. Journal of Finance, Accounting and Management, 4 (1), 1-12.




DOI: http://dx.doi.org/10.46827/ejefr.v0i0.715

Refbacks

  • There are currently no refbacks.


Copyright (c) 2020 Sundus K. Al-Yatama, Musaed S. Al Ali, Khuloud M. Al Awadhi, Nour M. Al Shamali

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.

The research works published in this journal are free to be accessed. They can be shared (copied and redistributed in any medium or format) and\or adapted (remixed, transformed, and built upon the material for any purpose, commercially and\or not commercially) under the following terms: attribution (appropriate credit must be given indicating original authors, research work name and publication name mentioning if changes were made) and without adding additional restrictions (without restricting others from doing anything the actual license permits). Authors retain the full copyright of their published research works and cannot revoke these freedoms as long as the license terms are followed.

Copyright © 2016 - 2023. European Journal of Economic and Financial Research (ISSN 2501-9430) is a registered trademark of Open Access Publishing Group. All rights reserved.

This journal is a serial publication uniquely identified by an International Standard Serial Number (ISSN) serial number certificate issued by Romanian National Library. All the research works are uniquely identified by a CrossRef DOI digital object identifier supplied by indexing and repository platforms. All the research works published on this journal are meeting the Open Access Publishing requirements and standards formulated by Budapest Open Access Initiative (2002), the Bethesda Statement on Open Access Publishing (2003) and  Berlin Declaration on Open Access to Knowledge in the Sciences and Humanities (2003) and can be freely accessed, shared, modified, distributed and used in educational, commercial and non-commercial purposes under a Creative Commons Attribution 4.0 International License. Copyrights of the published research works are retained by authors.