Determinants of Leverage for Unlisted Firms: Evidence from Ethiopian Private Insurance Companies

Dereje Getachew Regasa


The objective of this study was to investigate determinants of financial leverage (capital structure) for unlisted private insurance companies of Ethiopia. Secondary data (mainly financial statements) obtained from Ethiopian private insurance companies were used for analysis. In this study both descriptive and econometric analytical methods were applied to describe the level of leverage and to examine the significant factors determining capital structure. The brief look at the result shows that on average the proportion of debt in the capital mix of Ethiopian private insurance companies is moderate. In the same way the result of random effect regression model exhibits that variables like firm liquidity, business risk and non debt tax shield were found to influence leverage negatively. Whereas variables such as asset tangibility, firm size and profitability were significant and had a positive influence on leverage. Thus, the result of this study also reflects that determinants of capital structure for unlisted firm (private insurance companies in this case) is more or less in line with theories and prior studies conducted for listed firms.

Keywords: Determinants, Insurance companies, Leverage, Random effect regression, Unlisted firm

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