The effect of macroeconomic variables on the performance of non-life insurance companies in Bangladesh

  • Md. Bokhtiar Hasan
  • SM Nahidul Islam
  • Abu N. M. WahidEmail author


This study examines the impact of some selected macroeconomic variables on the performance of the non-life insurance companies of Bangladesh. Here, we consider 32 such companies that are operating in the country. These companies are observed over the period of 7 years (2009–2015) giving rise to 224 panel observations. In our study, we use two performance measures, like return on asset (ROA) and return on equity (ROE) as dependent variables. The explanatory variables are categorized as macroeconomic factors and firm-specific factors. Former includes variable such as inflation rate, GDP growth rate, interest rate, and exchange rate. To measure the firm-specific factors, we use eight proxy variables such as age, size, loss ratio, solvency margin, assets tangibility, liquidity ratio, debt ratio, and management competence index as explanatory variables. The research employs panel data regression methodology to examine the effects of macroeconomic variables on the performance of the aforementioned companies. The regression results of our study suggest that except interest rate, none of the macroeconomic variables has statistically significant influence on the performance of non-life insurance companies. These results, indeed, gainsay with economic theories. On the other hand, the firms’ specific factors; e.g., age, sizes, loss ratio, solvency margin, tangibility of assets, and management competence index have statistically significant impact on the performance of the non-life insurance sector of Bangladesh. Thus, the interest rate along with firm-specific factors can be identified as determinants of the performance of the Bangladeshi non-life insurance companies. This analysis obviously provides some noteworthy new information to different stakeholders of the Bangladesh non-life insurance sector. In particular, the findings of the study are expected to be useful to both domestic and foreign investors to make more rational decisions regarding selection of insurance companies’ stocks for their portfolios at Dhaka stock exchange. Public policy authorities may also use the same results to formulate sound policies to ensure economic growth and stability of the nation.


Non-life insurance companies Macroeconomic variables Firm performance Panel data Fixed effect Random effect 

JEL Classifications

C23 E66 F62 G22 



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Copyright information

© Editorial Office, Indian Economic Review 2019

Authors and Affiliations

  • Md. Bokhtiar Hasan
    • 1
  • SM Nahidul Islam
    • 2
  • Abu N. M. Wahid
    • 3
    Email author
  1. 1.Department of Finance and BankingIslamic UniversityKushtiaBangladesh
  2. 2.Department of Business AdministrationInternational University of ScholarsDhakaBangladesh
  3. 3.Tennessee State UniversityNashvilleUSA

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