Effects of Financial Performance and Firm Size on Firms’ Value: Empirical Study of Insurance Companies in Nigeria

Abstract

The listed Insurance firms in Nigeria Stock Exchange (NSE) have been recording mixed results and that places a question on their financial performance and firm value. Over the last decades, this poor trend in the company’s firm value of the listed firms justified a relook into the financial performance and firm value of the company. Therefore, this study evaluates the Effects of Financial Performance and Firm Size on Firms ‘Value of 21 quoted Insurance Companies on the Nigerian Stock Exchange as at the 31st December, 2020. The study covered the period of 8 years (2012-2019). Return on Assets and Return on Equity proxied financial performance; Natural logarithm of total assets proxied firm size while Tobin's Q proxied firms' value. Firm age serves as control variable which is defined as firms' incorporated period. The study uses ex-post facto research design and longitudinal panel which consists of time series and cross sectional data. The data were analyzedusing descriptive statistics and regression with the aid of STATA 15 version. The study revealed that all explanatory variables, except return on assets, firm Size and Firm Age have positive significant effect on Tobin's Q. Specifically, Return on equity has insignificant effect on Tobin's Q. Therefore, the study recommends that the management of Insurance firms in Nigeria should only use return on assets and firm size by increasing the total assets to improve the firm's value.