Capital Structure and Financial Performance of Insurance Companies in Nigeria: An Empirical Investigation

This study empirically examines the relationship between capital structure decisions and financial performance in Nigerian insurance companies using data from quoted firms on the Nigerian Exchange Group from 2015 to 2023. Capital structure theory, encompassing the trade-off theory, pecking order theory, and agency theory, provides competing predictions about the optimal mix of equity, long-term debt, and hybrid instruments for maximizing firm value. In insurance companies, capital structure is further constrained by minimum statutory solvency requirements imposed by NAICOM, creating a regulated capital environment distinct from non-financial firms. The study constructs a balanced panel using leverage ratio, equity-to-asset ratio, and debt-to-equity ratio as capital structure measures, with return on assets, return on equity, and Tobin's Q as performance indicators. Fixed effects and random effects panel regression models are estimated with Hausman test selection. The study controls for firm size, premium growth rate, and investment yield as firm-level characteristics. Preliminary findings are expected to reveal a non-linear relationship between leverage and performance, consistent with an optimal capital structure prediction. The research contributes empirical evidence to the capital structure-performance debate in Nigeria's regulated financial services sector and offers recommendations for NAICOM's recapitalization policy design. Keywords: Capital Structure, Financial Performance, Insurance Companies, Nigeria, Panel Regression.