Effect of inflation on investment among insurance companies in Kenya
View/ Open
Date
2012-11Author
Muthoni, Joseph N
Type
ThesisLanguage
enMetadata
Show full item recordAbstract
The Kenyan insurance industry plays a critical role in financial and economic
development. It is in this case that understanding how inflation affects the sector and
specifically investment will help make sound business decisions. Inflation is expected
and has been proved by this study to have a weak negative effect on the insurance
investment as it erodes the value of investments products.
The purpose of the study is to investigate the effect of inflation on investment among
insurance companies in Kenya. This study was conducted through the use of a descriptive
design. The target population for this study was 46 insurance companies in Kenya. The
study used purposeful sampling to pick 35 insurance companies authorized to transact
miscellaneous class of insurance business and by extension bid bonds business. The
secondary data was collected from the companies audited financial statements, the central
bureau of statistics and also CBK. The data collected was run through various models so
as to clearly bring out the effects of change in inflation on firm‟s investment. The results
obtained from the models were presented in tables
The study concludes that inflation have a negative influence on the investment among
insurance companies in Kenya. Inflation has a coefficient of -0.0668 which indicates that
inflationary environment are detrimental to insurance investment. High inflation brings
with it less predictable returns on capital purchased and the also the expectation that
demand will fall in the future while low inflation will encourage investment and a help
businesses develop a long term view. The study recommends that central bank should
concentrate on those policies which keep the inflation rate below the first threshold
because it may be helpful for the achievement of robust economic growth and enhance
investment. The companies‟ management should ensure that good corporate policies are
implemented by the insurance companies to offset the effect of this macro-economic
factor. Further, the management should also come up with structured solutions and
strategies to mitigate the effect of inflation.
Citation
MBA Thesis 2012Sponsorhip
University of NairobiPublisher
School of Business, University of Nairobi
Description
Master Thesis