Corporate Governance and Profitability of Insurance Companies: Empirical Insights from Pakistan

Abstract

This research seeks to explore how corporate governance affects the profitability of insurance companies in Pakistan. The empirical analysis utilizes data from a panel of 35 insurance firms covering the period from 2004 to 2022, employing the random effect technique for model estimation. Profitability, measured by Return on Assets (ROA), is the primary metric. The findings reveal that leverage, liquidity, premium growth, risk, and corporate governance significantly influence the profitability of insurance companies in Pakistan. However, age, tangibility, and inflation exhibit an insignificant relationship with performance in the insurance sector. Notably, corporate governance emerges as a pivotal variable with a broad impact on these companies. The study suggests that improving corporate governance practices is crucial for insurance companies to enhance profitability and overall performance.