Capital Structure of Insurance Companies in Bahrain

Naser Jamil Najjar, Krassimir Petrov

Abstract


The impact of firm characteristics on the capital structure of the insurance industry in Bahrain is nowadays
considered to be an important issue. Many insurance companies don't know what factors affect their capital
structure, making ad-hoc, and sometimes inappropriate, decisions regarding their financial mix. We attempt to
highlight the critical firm characteristics that managers should consider when setting their “optimal” capital
structure.
Our study is based on a multiple linear regression analysis using SPSS. Each independent variable along with the
dependent variable is measured separately for a sample of insurance companies in Bahrain for the period of
2005-2009.
Our research identifies a strong relationship between firm characteristics, such as (1) Tangibility of Assets, (2)
Profitability, (3) Firm Size, (4) Revenue Growth, and (5) Liquidity, and observed capital structure, as represented
by the Debt Ratio, although Profitability and Revenue Growth are not statistically significant and require further
research.


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International Journal of Business and Management   ISSN 1833-3850 (Print)   ISSN 1833-8119 (Online)

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