The Nature of Capital Structure among Insurance Companies in Ghana

Abstract

The objective of the study was to ascertain the nature of the capital structure of insurance companies in Ghana. Panel data was derived from annual reports and financial statements of 15 insurance companies registered with the National Insurance Commission from 2002 to 2011 and the analysis of variance (ANOVA) was applied to identify the differences in the nature of the capital structure among insurance companies based on their age and size. The results suggest that there is debt in the capital structure in the insurance sector of Ghana and out of these debts component, short term debt takes a higher proportion. The study also found that the proportion of equity capital is lesser than debt capital and again it established a significant difference in the proportion of equity capital practice and no difference in the debt capital practice among the different categories of insurance companies. Finally, our study allowed for yet another important comparison of capital structure between firms which are aged more than two decades and those which are aged less than two decades.

Keyword: insurance companies, equity ratio, debt ratio, age, size