MANAGEMENT EFFICIENCY AND FINANCIAL STABILITY OF INSURANCE FIRMS LISTED AT THE NAIROBI SECURITIES EXCHANGE, KENYA
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Jun 13, 2026
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Abstract
The insurance industry plays a crucial role in fostering the ongoing growth and prosperity of the economy. The insurance sector is accountable for ensuring the ongoing survival of businesses, mitigating the risk associated with financial losses, and striving to eliminate uncertainty for investors. Despite their importance, recent statistics indicate that these firms have been having trouble maintaining their financial stability. Limited research exists on how management efficiency affects the financial stability of these firms. This study addressed this gap by analyzing the effect of management efficiency and the financial stability of insurance firms listed at the NSE, Kenya. The study was guided by the Resource-Based View Theory. A descriptive research design was adopted, with a target population of 6 insurance firms listed at the NSE, Kenya, as of December 2024, and the study was conducted through a census approach. Secondary panel data for the years between 2015 and 2024 were utilized to collect financial information from the insurance firms' records, IRAs, and NSEs. Data was gathered from secondary sources with the aid of a secondary data collection sheet and analyzed using descriptive and inferential statistics. The descriptive statistical tools included frequencies, percentages, means, variances, and standard deviations. Inferential statistical tools included Pearson’s Product-Moment correlation and panel regression analysis. The results of the model summary indicated an R² of 0.6106, implying that 61.06% of the variation in the financial stability of insurance firms listed at the NSE is explained by management efficiency. The regression results revealed that management efficiency exhibited a positive and significant effect (β = 0.3375, p = 0.0006), implying that higher operating costs increase leverage and weaken financial stability. Based on these findings, the study recommends that insurance firms should enhance operational efficiency. Regulators should also reinforce risk-based supervision and prudential guidelines to enhance the resilience and stability of the insurance sector in Kenya.
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References
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Kariuki, D. W., Muturi, W., & Njeru, A. (2021). Influence of Liquidity on Financial Performance of Insurance Companies in Kenya. Journal of Agriculture, Science and Technology, 20(3), 94-101.
Kuria, D.(2024). Mobile Banking and the Propagation of E-Commerce in Kenya through Reliable Payment Solutions Journal of Financial Economics, 7(2), 64-84
Lakens, D. (2022). Sample Size Justification. Collabra: Psychology, 8(1), 33-67.
Lipunga, A. M. (2016). Determinants of Profitability of Listed Commercial Banks in Developing Countries: Evidence from Malawi. Research Journal of Finance and Accounting, 5(6), 41-49.
Mhlongo, N., Kunjal, D., & Muzindutsi, P. F. (2025). The Influence of Fintech Innovations on Bank Competition and Performance in South Africa. Modern Finance, 3(2), 1-12.
Mian, A., & Santos, J. A. (2018). Liquidity Risk And Maturity Management over the Credit Cycle. Journal of Financial Economics, 6(2), 16-28
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Muriithi, P. K., Nasieku, T., & Memba, F. (2022). Influence of Credit Management on Financial Intermediation Efficiency of Deposit Taking SACCOS’S in Kenya. Journal of Accounting, 5(1), 1-12.
Muriuki, C. (2021). Effect of Mobile Lending on the Level of Nonperforming Loans in the Kenyan Banking Industry . International Academic Journal of Economics and Finance, 3(4), 172-185.
Musabi, A. B., & Mbithi, M. (2018). Influence of Prudential Regulations on Financial Performance of Commercial Banks in Kenya. Strategic Journal of Business & Change Management, 5(4), 1176-1190.
Mutua, M. M., Juma, J., & Owuor, D. (2020). Effects of Project Monitoring Practices on Implementation of Road Construction Projects: A Case Study of Kilifi County. The Strategic Journal of Business & Change Management, 7(1), 664-685.
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Odhiambo, W. O., Ndede, F., & Wamugo, L. (2025). Prudential Regulations and Profitability of Microfinance Banks in Kenya. Asian Journal of Economics, Finance and Management, 7(1), 138-151.
Okeno, D. M. (2018). Influence of Central Bank Prudential Guidelines on Performance of Commercial Banks in Kenya.International Journal Of Economics and Financial,9(4), 76-90.
Olubunmi, A., Paul, G., & Aderogba, J. (2025). Digital Taxation and Sustainable Development Goals in a Developing Economy. International Journal of Innovative Science and Research Technology, 10(6), 378-395.
Ondieki, D. N., & Jagongo, A. (2013). Effects of Lowering Central Bank Rate on Bank’s Prime Rate: An Analysis of Kenyan Commercial Banks. International Journal of Humanities and Social Science, 3(20), 207-214.
Odongo, G. N., & Irungu, A. M. (2023). Asset Quality and the Financial Performance of Commercial Banks in South Sudan. Journal of Finance and Accounting, 3(3), 48-57.
Ongore, V. O., & Kusa, G. B. (2013). Determinants of Financial Performance of Commercial Banks in Kenya. International Journal of Economics and Financial Issues, 3(1), 237-252.
Onyekwelu, U. L., Chukwuani, V. N., & Onyeka, V. N. (2018). Effect of Liquidity on Financial Performance of Deposit Money Banks in Nigeria. Journal of Economics and Sustainable Development, 9(4), 19-28.
Ouma, C. O., Makori, D., & Aluoch, M. O. (2024). Firm Characteristics and Financial Performance of Microfinance Banks in Kenya. International Academic Journal of Economics and Finance, 4(3), 164-193.
Ozurumba, B. A. (2016). Impact of Non-Performing Loans on the Performance of Selected Commercial Banks in Nigeria. Research Journal Of Finance and Accounting, 7(16), 95-109.
Pape, F. (2020). Rethinking Liquidity: A Critical Macro-Finance View. Finance And Society, 6(1), 67-75.
Park, H. M. (2011). Practical Guides to Panel Data Modeling: A Step-by-Step Analysis using Stata. Public Management and Policy Analysis Program, Graduate School Of International Relations, International University of Japan, 12, (2), 1-52.
Peltzman, S. (1977). The Gains and Losses from Industrial Concentration. The Journal of Law and Economics, 20(2), 229-263.
Quoc Trung, N. K. (2021). Determinants of Bank Performance in Vietnamese Commercial Banks: An Application of the Camels Model. Cogent Business & Management, 8(1), 17-43.
Qureshi, M. S., Adrian, T., & Tsuruga, T. (2021). Bank to Sovereign Risk Transmission: The Journal of Law and Economics, 10(2), 29-63.
Ray, S., & Mahapatra, S. K. (2019). Asset Quality and Performance: An Empirical Study of Indian Microfinance Institutions. International Journal of Services, Economics and Management, 10(3), 248-265.
Reschiwati, R., Syahdina, A., & Handayani, S. (2020). Effect of Liquidity, Profitability, and Size of Companies on Firm Value. Utopia y Praxis Latinoamericana, 25(6), 325-332.
Said, A. (2018). Effect of the Asset Quality on the Bank Profitability: A Study of US Commercial Small Banks. International Research Journal of Applied Finance, 9(4), 196-204.
Ristyawan, M. R., Putro, U. S., & Siallagan, M. (2023). Decision Making Mechanism in research. Cogent Business & Management, 10(2), 224-217.
Rono, R., Kimengi, I. N., & Githinji, F. W. (2021). Research Paper Activities used by Secondary School Teachers to Address the Menace of Drug and Substance Abuse in Kenya. Journal of Contemporary Social Sciences and Education, 2(1), 1-14.
Theophillus, A., Akintoye, R., & Salawu, R. O. (2018). Earnings Quality and Firms Financial Performance: A Missing Link in the Listed Firms in Nigeria. International Journal of Accounting & Finance (IJAF), 7(2) ),53-66.
Trad, N., Trabelsi, M. A., & Goux, J. F. (2017). Risk and Profitability of Islamic Banks: A Religious Deception or an Alternative Solution?. European Research on Management and Business Economics, 23(1), 40-45.
Van Doorn, J., Lemon, K. N., Mittal, V., Nass, S., Pick, D., Pirner, P., & Verhoef, P. C. (2010). Customer engagement behavior: Theoretical foundations and research directions. Journal of service research, 13(3), 253-266.
Vanderstoep, S. W., & Johnson, D. D. (2008). Research Methods for Everyday life: Blending Qualitative and Quantitative Approaches. John Wiley & Sons 7(2) ,1153-1266..
Wairimu, I. N. (2017). The Effect of Central Bank Prudential Regulations on Performance of Commercial Banks in Kenya. Research Journal of Finance and Accounting, 4(16), 5-14.
Wanjagi, J., Nasieku, T., & Fatoki, O. (2024). Effect of Capital Adequacy on Operational Efficiency of Commercial Banks in Kenya. ESI Preprints (European Scientific Journal, ESJ), 20(22), 49-49.
Wanjala, K., & Gachanja, J. N. (2020). Mr Bank Specific Determinants of Nonperforming Loans in Kenya. Business Perspective Review, 2(1), 29-44.
Wanjiru, B. N., Jagongo, A. O., & Ndede, F. W. (2024). Effect of Capital Adequacy on Financial Performance of Commercial Banks in Kenya. The Strategic Journal of Business & Change Management, 11(2), 327-349.
Wanke, P., Maredza, A., & Gupta, R. (2017). Merger and Acquisitions in South African Banking: A Network DEA Model. Research in International Business and Finance, 41,(9) 362-376.
Waswa, C. W., Mukras, M. S., & Oima, D. (2018). Effect of Liquidity On Financial Performance of the Sugar Industry in Kenya. Research Journal of Finance and Accounting, 4(16), 35-54.
Westfall, J., Kenny, D. A., & Judd, C. M. (2014). Statistical Power and Optimal Design in Experiments in which Samples of Participants Respond to Samples of Stimuli. Journal of Experimental Psychology: General, 4(5), 20-26.
Barney, J. B., & Arikan, A. M. (1991). The Resource‐Based View: Origins and Implications. The Blackwell Handbook of Strategic Management, 8(4),123-182.
Barus, J. J., Muturi, W., Kibati, P., & Koima, J. (2017). Effect of Management Efficiency on Financial Performance of Savings and Credit Societies in Kenya. Journal of Strategic
Dogarawa, A. B. (2020). Estimating the Marginal Effect of Interaction between Industry Concentration and Camels Indicators on Financial Performance of Deposit Money Banks in Nigeria. Journal of Financial Reporting and Accounting, 4, (9), 49 - 60.
Kariuki, D. W., Muturi, W., & Njeru, A. (2021). Influence of Liquidity on Financial Performance of Insurance Companies in Kenya. Journal of Agriculture, Science and Technology, 20(3), 94-101.
Kuria, D.(2024). Mobile Banking and the Propagation of E-Commerce in Kenya through Reliable Payment Solutions Journal of Financial Economics, 7(2), 64-84
Lakens, D. (2022). Sample Size Justification. Collabra: Psychology, 8(1), 33-67.
Lipunga, A. M. (2016). Determinants of Profitability of Listed Commercial Banks in Developing Countries: Evidence from Malawi. Research Journal of Finance and Accounting, 5(6), 41-49.
Mhlongo, N., Kunjal, D., & Muzindutsi, P. F. (2025). The Influence of Fintech Innovations on Bank Competition and Performance in South Africa. Modern Finance, 3(2), 1-12.
Mian, A., & Santos, J. A. (2018). Liquidity Risk And Maturity Management over the Credit Cycle. Journal of Financial Economics, 6(2), 16-28
Moulton, H. G. (1918). Commercial Banking and Capital Formation: III. Journal of Political Economy, 26(7), 705-731.
Mugambi, P. M., Muturi, W., & Njeru, A. (2023). Effect of Liquidity on Financial Performance of Star Rated Hotels in Nairobi County, Kenya. International Academic Journal of Economics and Finance, 3 (8), 14-22
Mugenda, O. M., & Mugenda, A. G. (2003). Research Methods: Quantitative & Qualitative Apporaches (Vol. 2, No. 2). Nairobi: Acts press.
Muriithi, P. K., Nasieku, T., & Memba, F. (2022). Influence of Credit Management on Financial Intermediation Efficiency of Deposit Taking SACCOS’S in Kenya. Journal of Accounting, 5(1), 1-12.
Muriuki, C. (2021). Effect of Mobile Lending on the Level of Nonperforming Loans in the Kenyan Banking Industry . International Academic Journal of Economics and Finance, 3(4), 172-185.
Musabi, A. B., & Mbithi, M. (2018). Influence of Prudential Regulations on Financial Performance of Commercial Banks in Kenya. Strategic Journal of Business & Change Management, 5(4), 1176-1190.
Mutua, M. M., Juma, J., & Owuor, D. (2020). Effects of Project Monitoring Practices on Implementation of Road Construction Projects: A Case Study of Kilifi County. The Strategic Journal of Business & Change Management, 7(1), 664-685.
Mutumira, M. (2019). Effect of Capital Adequacy On The Financial Performance of Insurance Companies in Kenya. International Academic Journal of Economics and Finance, 3(4), 172-185.
Mwamba, N., Massawe, N., & Komba, K. (2016). Financial Sector Development and Financial Inclusion. Tanzania: The Path to Prosperity, 2(4), 11-19.
Naili, A., Hidayat, M. H., & Elina, R. (2025). Optimizing the Role of Working Capital Financing in Improving the Economy of the Prenduan Village Community: Case Study Of Bprs Bhakti Sumekar, Pragaan Branch. Ekspansi: Jurnal Ekonomi, Keuangan, Perbankan, dan Akuntansi, 17(1), 41-56.
Ndegwa, K. K. (2018). Effect of Capital Adequacy on the Financial Performance of Microfinance Banks In Kenya International Academic Journal of Economics and Finance, 15(4), 72-85.
Ndungu, S. (2020). Relationship Between Asset Securitization and Financial Performance of Listed Commercial Banks in Kenya. Journal of Finance and Accounting, 9(9), 78 -99.
Ngatia, J., Makori, D., & Theuri, M. J. (2024). Camel Financial Indicators and Performance of Tier Three Commercial Banks in Kenya. Journal of Finance and Accounting, 8(9), 80-99.
Nguyen, K. Q. T., Phan, T. H. N., & Hang, N. M. (2024). The Effect of Liquidity on Firm’s Performance: Case of Vietnam. Journal of Eastern European and Central Asian Research (JEECAR), 11(1), 176-187.
Njeru, A. K. (2022). Asset Quality Assessment in the Absence of Quality Data towards Optimal Credit Intermediation (No. 63). KBA Centre for Research on Financial Markets and Policy Working Paper Series.
Odhiambo, W. O., Ndede, F., & Wamugo, L. (2025). Prudential Regulations and Profitability of Microfinance Banks in Kenya. Asian Journal of Economics, Finance and Management, 7(1), 138-151.
Okeno, D. M. (2018). Influence of Central Bank Prudential Guidelines on Performance of Commercial Banks in Kenya.International Journal Of Economics and Financial,9(4), 76-90.
Olubunmi, A., Paul, G., & Aderogba, J. (2025). Digital Taxation and Sustainable Development Goals in a Developing Economy. International Journal of Innovative Science and Research Technology, 10(6), 378-395.
Ondieki, D. N., & Jagongo, A. (2013). Effects of Lowering Central Bank Rate on Bank’s Prime Rate: An Analysis of Kenyan Commercial Banks. International Journal of Humanities and Social Science, 3(20), 207-214.
Odongo, G. N., & Irungu, A. M. (2023). Asset Quality and the Financial Performance of Commercial Banks in South Sudan. Journal of Finance and Accounting, 3(3), 48-57.
Ongore, V. O., & Kusa, G. B. (2013). Determinants of Financial Performance of Commercial Banks in Kenya. International Journal of Economics and Financial Issues, 3(1), 237-252.
Onyekwelu, U. L., Chukwuani, V. N., & Onyeka, V. N. (2018). Effect of Liquidity on Financial Performance of Deposit Money Banks in Nigeria. Journal of Economics and Sustainable Development, 9(4), 19-28.
Ouma, C. O., Makori, D., & Aluoch, M. O. (2024). Firm Characteristics and Financial Performance of Microfinance Banks in Kenya. International Academic Journal of Economics and Finance, 4(3), 164-193.
Ozurumba, B. A. (2016). Impact of Non-Performing Loans on the Performance of Selected Commercial Banks in Nigeria. Research Journal Of Finance and Accounting, 7(16), 95-109.
Pape, F. (2020). Rethinking Liquidity: A Critical Macro-Finance View. Finance And Society, 6(1), 67-75.
Park, H. M. (2011). Practical Guides to Panel Data Modeling: A Step-by-Step Analysis using Stata. Public Management and Policy Analysis Program, Graduate School Of International Relations, International University of Japan, 12, (2), 1-52.
Peltzman, S. (1977). The Gains and Losses from Industrial Concentration. The Journal of Law and Economics, 20(2), 229-263.
Quoc Trung, N. K. (2021). Determinants of Bank Performance in Vietnamese Commercial Banks: An Application of the Camels Model. Cogent Business & Management, 8(1), 17-43.
Qureshi, M. S., Adrian, T., & Tsuruga, T. (2021). Bank to Sovereign Risk Transmission: The Journal of Law and Economics, 10(2), 29-63.
Ray, S., & Mahapatra, S. K. (2019). Asset Quality and Performance: An Empirical Study of Indian Microfinance Institutions. International Journal of Services, Economics and Management, 10(3), 248-265.
Reschiwati, R., Syahdina, A., & Handayani, S. (2020). Effect of Liquidity, Profitability, and Size of Companies on Firm Value. Utopia y Praxis Latinoamericana, 25(6), 325-332.
Said, A. (2018). Effect of the Asset Quality on the Bank Profitability: A Study of US Commercial Small Banks. International Research Journal of Applied Finance, 9(4), 196-204.
Ristyawan, M. R., Putro, U. S., & Siallagan, M. (2023). Decision Making Mechanism in research. Cogent Business & Management, 10(2), 224-217.
Rono, R., Kimengi, I. N., & Githinji, F. W. (2021). Research Paper Activities used by Secondary School Teachers to Address the Menace of Drug and Substance Abuse in Kenya. Journal of Contemporary Social Sciences and Education, 2(1), 1-14.
Theophillus, A., Akintoye, R., & Salawu, R. O. (2018). Earnings Quality and Firms Financial Performance: A Missing Link in the Listed Firms in Nigeria. International Journal of Accounting & Finance (IJAF), 7(2) ),53-66.
Trad, N., Trabelsi, M. A., & Goux, J. F. (2017). Risk and Profitability of Islamic Banks: A Religious Deception or an Alternative Solution?. European Research on Management and Business Economics, 23(1), 40-45.
Van Doorn, J., Lemon, K. N., Mittal, V., Nass, S., Pick, D., Pirner, P., & Verhoef, P. C. (2010). Customer engagement behavior: Theoretical foundations and research directions. Journal of service research, 13(3), 253-266.
Vanderstoep, S. W., & Johnson, D. D. (2008). Research Methods for Everyday life: Blending Qualitative and Quantitative Approaches. John Wiley & Sons 7(2) ,1153-1266..
Wairimu, I. N. (2017). The Effect of Central Bank Prudential Regulations on Performance of Commercial Banks in Kenya. Research Journal of Finance and Accounting, 4(16), 5-14.
Wanjagi, J., Nasieku, T., & Fatoki, O. (2024). Effect of Capital Adequacy on Operational Efficiency of Commercial Banks in Kenya. ESI Preprints (European Scientific Journal, ESJ), 20(22), 49-49.
Wanjala, K., & Gachanja, J. N. (2020). Mr Bank Specific Determinants of Nonperforming Loans in Kenya. Business Perspective Review, 2(1), 29-44.
Wanjiru, B. N., Jagongo, A. O., & Ndede, F. W. (2024). Effect of Capital Adequacy on Financial Performance of Commercial Banks in Kenya. The Strategic Journal of Business & Change Management, 11(2), 327-349.
Wanke, P., Maredza, A., & Gupta, R. (2017). Merger and Acquisitions in South African Banking: A Network DEA Model. Research in International Business and Finance, 41,(9) 362-376.
Waswa, C. W., Mukras, M. S., & Oima, D. (2018). Effect of Liquidity On Financial Performance of the Sugar Industry in Kenya. Research Journal of Finance and Accounting, 4(16), 35-54.
Westfall, J., Kenny, D. A., & Judd, C. M. (2014). Statistical Power and Optimal Design in Experiments in which Samples of Participants Respond to Samples of Stimuli. Journal of Experimental Psychology: General, 4(5), 20-26.