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2 Macroeconomic and Firm Specific Determinants of Profitability and Performance of Listed Insurance Companies in Bangladesh Published Date: June 2022 Author Name: Md. Tanvir Hasan, Assistant Professor, Department of Finance, University of Dhaka Dr Sheikh Tanzila Deepty, Assistant Professor, Department of Finance, University of Dhaka DOI Number: Abstract: Abstract This paper investigates the firm specific and macroeconomic determinants of profitability of 41 life and non-life insurance companies of Bangladesh from 2014 to 2018. Several firm specific and macroeconomic variables have influential effect on the profitability and financial performance of insurance companies. To analyze the prominent factors of profitability measured in terms of Return on Asset (ROA) and Return on Equity (ROE), this paper uses firm specific factors such as size, premium growth rate, liquidity ratio, debt ratio, operating cost ratio, underwriting risk, reinsurance dependence, solvency margin, and investment performance along with macroeconomic factors such as GDP growth rate, inflation rate, and time weighted interest rate. Applying panel regression the study finds that premium growth rate, liquidity ratio, underwriting concentration, debt ratio, and inflation have positive relationship with both ROA and ROE, while reinsurance dependence, investment performance, solvency margin, and operating cost ratio have negative association.Decile distributions of firms’ performance across profitability factors show that firms in higher decile bins are more efficient in terms of ROA and ROE. Finally, Principal Component Analysis (PCA) shows significant positive association between profitability and profit determinant factors. Keywords: Return on Asset, Return on Equity, determinants of profitability, panel data regression JEL: C33, E31, G2 |