The Nexus between Gross Domestic Product (GDP) and Financial Performance of Firms: Empirical Evidence from the Nigerian Insurance Industry

Abstract

This study looked at the impact of gross domestic products (GDP) on the Financial performance of insurance firms in Nigeria using gross written premium (GWP), profit before tax (PBT), total assets (TA), capital employed (CE) and shareholders fund (SHF) as proxies for financial performance. The study adopted the theories of shareholder primacy theory also known as the shareholder value theory and signalling theory. shareholder primacy theory sees organisation as entities with the primary objective of maximising the wealth of the shareholder while signalling theory looks at the propensity to change of financial performance to changes in GDP figures. Using secondary data sources, findings from the results of our regression analysis show that Nigeria’s GDP has an impact on Total assets, total capital employed, profit before tax and shareholders fund but has negligible impact on the gross written premiums of insurance firms in Nigeria. It was therefore recommended that government should seek to contribute positively to GDP growth through the instrumentality of fiscal and monetary policies, enterprises should contribute to GDP growth through taxes and employee benefits and firms should adopt a bullish approach to consumption for better GDP outcomes.

Keywords: impact, gross domestic products, financial performance

DOI: 10.7176/RJFA/12-6-07

Publication date:March 31^st 2021