Microeconomic and Macroeconomic Determinants of the Profitability of the Insurance Sector in Macedonia
The aim of this paper is to investigate the impact of the most representative microeconomic and macroeconomic determinants on the profitability of the insurance sector in Macedonia. The Johansen cointegration technique has been applied to the regression model with quarterly data for the period of time from 2006 to 2011. The results confirm the theoretical suggestions that the assets have a statistically significant positive impact on ROE, from the micro perspective. The interest rate on denar deposits without a currency clause for enterprises has a statistically significant positive impact on ROE and ROA, whilst the rate on deposits of non-financial entities in terms of GDP has a statistically significant negative impact on ROE and ROA, from the macro perspective. Recommendations for increasing the profitability of insurance companies: more productive use of their resources, launching innovative products, enlarging their portfolio, promotions to investors for recapitalization. Recommendations from the macro aspect: structural reforms, extension of savings investments in banks, implementation of new financial instruments, mutual projects amongst the insurance and banking sectors in order that they become complementary.(original abstract)
- Al-Shami, 2008, Determinants of Insurance Companies' Profitability in UAE, College of Business, University Utara Malaysia.
- Berger, A.N., 1995, The Relationship between Capital and Earnings in Banking, Journal of Money, Credit and Banking, no. 27.
- Buser, S.A., Chen, A.H., Kane, E.J., 1981, Federal Deposit Insurance, Regulatory Policy and Optimal Bank Capital, Journal of Finance, 35.
- Ćurak, M., Pepur, S., Poposki, K., 2011, Firm and Economic Factors and Performance: Croatian Composite Insurers, The Business Review Cambridge, vol. 19, no. 1: 136-142.
- Davidovska-Stojanova, B., Jovanovich, B., Kadievska-Vojnovik, M., Ramadani, G., Petrovska, M., 2008, Real Estate Prices in the Republic of Macedonia, National Bank of the Republic of Macedonia.
- Harrington, C., 2005, The Effect of Competitive Structure on the Relationship between Leverage and Profitability.
- Harris, R., Sollis, R., 2003, Applied Time Series Modeling and Forecasting, John Wiley and Sons.
- Hrechaniuk, B., Lutz, S., Talavera, A., 2007, Do Determinants of Insurers' Performance Differ in Old EU, the New EU and Outside?, University of Bonn and University of Manchester.
- Hurdle, G.J., 1974, Leverage, Risk, Market Structure and Profitability, Review of Economics & Statistics, 56 (4).
- Hutchison, Cox, 2006, The Casual Relationship between Capital and Profitability, Proceedings of the Annals of Financial Economics Westwood Development Group, University of Ontario, Institute of Technology, Ontario.
- ISA, 2010, Annual report of the insurance market in Republic of Macedonia in 2009, Insurance Supervision Agency.
- ISA, 2011, Annual report of the insurance market in Republic of Macedonia in 2010, Insurance Supervision Agency.
- ISA, 2012, Annual report of the insurance market in Republic of Macedonia in 2011, Insurance Supervision Agency.
- Johansen, S., 1992, Determination of Cointegration Rank in the Presence of a Linear Trend, Oxford Bulletin of Economics and Statistics, vol. 54, no. 3: 383-397.
- Kasharma, M.K., 1998, Actors Affecting the Profitability of Insurance Companies in Jordan, Alyarmouk University.
- Kashish, K., 1998, Factors Affecting the Profitability of Insurance Companies in Jordan, Working Paper, Alyarmouk University.
- Panayiotis, P., Athanasoglou, S., Delis, M., 2008, Bank Specific, Industry Specific and Macroeconomic Determinants of Bank Profitability, International Financial Markets, Institutions & Money, vol. 18.
- Petrevski, G., 2008, Management Banks, Faculty of Economics - Скопје.
- Vijayakumar, A., Kadirvelu, S., 2004, Determinants of Profitability: The Case of Indian Public Sector Power Industries, Management Accountant - Calcutta, vol. 39; part 2, Institute of cost and works accountants of India: 118-132.
- Wright, K.M., 1992, The Life Insurance Industry in the United States an Analysis of Economic and Regulatory Issues, Country Economics Department the World Bank policy research working paper, no. 857.