International Journal of Emerging Markets

Market structure, efficiency and profitability of insurance companies in Ghana

Abdul Latif Alhassan George Kojo Addisson Michael E. Asamoah
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Abdul Latif Alhassan George Kojo Addisson Michael E. Asamoah , (2015),"Market structure,
efficiency and profitability of insurance companies in Ghana", International Journal of Emerging
Markets, Vol. 10 Iss 4 pp. 648 - 669
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IJOEM
10,4
648
Received 28 October 2013
Revised 7 February 2014
27 March 2014
Accepted 5 June 2014
Downloaded by University of Ghana At 17:21 27 June 2016 (PT)
International Journal of Emerging
Markets
Vol. 10 No. 4, 2015
pp. 648-669
Emerald Group Publishing Limited
1746-8809
DOI 10.1108/IJoEM-06-2014-0173
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1746-8809.htm
Market structure, efficiency and
profitability of insurance
companies in Ghana
Abdul Latif Alhassan
University of Ghana Business School, University of Ghana, Accra, Ghana
George Kojo Addisson
STARLIFE Insurance Company, Accra, Ghana, and
Michael Effah Asamoah
Department of Finance, Central University College, Accra, Ghana
Abstract
Purpose The purpose of this paper is to examine the impact of the regulatory-driven market
structure on firm pricing behaviour by testing the structure-conduct-performance (S-C-P) hypothesis
for both life and non-life insurance markets in Ghana.
Design/methodology/approach Using a panel data on 14 life and 22 non-life insurers from 2007
to 2011, the authors employed the Herfindahl Hirschman Index and concentration ratio as proxies
for the S-C-P hypothesis while efficiency scores were estimated using the data envelopment analysis
technique to proxy for the efficient structure (ES) hypothesis. The dependent variable, profitability was
measured as return on assets while controlling for size, underwriting risk, leverage, GDP growth
rate and inflation. The models were estimated using the panel corrected standard errors of Beck and
Katz (1995) and random effects estimations.
Findings The results from the empirical estimation provide ample evidence in support for ES hypothesis
for both life and non-life insurance markets. While conflicting results was found for SCP hypothesis in the
non-life insurance market, it was rejected in the life insurance market. The findings also point to an
increasing level of competition in both life and non-life insurance industry in Ghana though they still remain
concentrated with the life insurance sector having high levels of efficiency compared to the non-life sector.
Practical implications The findings of the study will enhance the understanding of firm behaviour in
the new markets created to shape regulatory and competition policies of the regulator to promote consumer
welfare while ensuring a stable industry to enhance its role in economic development.
Originality/value This is the first study to test the market power and efficient hypotheses on the
insurance industry in Ghana. To the best of the authors knowledge, this study is the first to examine
the determinants of profitability in the non-life insurance market.
Keywords Profitability, Insurance, Efficiency, Ghana, Market structure
Paper type Research paper
1. Introduction
Following the separation of life insurance business from non-life insurance business in
Ghana with the passage of the Insurance Act 724 in 2006, most of the insurance firms
maintained their non-life businesses in the original companies to set up new companies
to manage the life businesses. The insurance market has since been opened to keen
competition among players and attracted new entrants bringing the total number of
industry players to 43 from 25 licensed firms in 2006. Five out of the 18 life insurance
companies control about 75 per cent of gross premiums over the last six years up to the
period ending 2011. In the non-life insurance market, concentration is still among five
out of the 25 firms. It is, however, interesting to note that the other 13 companies in the
life insurance and 20 in the non-life insurance business that control at most 25 per cent
 of the market have been gaining some points in their share of the market. The Insurance
industry has also been experiencing growth in premium mobilization above companies
the growth of the non-life insurance business since the Financial Sector Strategic
Plan II in 2012. These changes would have an impact on the structure of the industry
in Ghana
and reflect a growing insurance industry which has the benefit of accumulating
long-term funds for access by financial agents for investment purpose to propel
economic growth. 649
The pricing policy of insurance companies reflects assumed risks with high-risk
clients charged high premiums while low-risk clients are charged low premiums to reflect
the risk they bring into an insurance pool. However, the ability of the insurers to correctly
classify their clients depends on the factors that interplay in the marketplace with the
impact of market structure on firm pricing behaviour having received considerable
attention in empirical literature studies from an industrial organization perspective.
The traditional structure-conduct-performance (SCP) hypothesis of Bain (1951) and made
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popular by Baumol (1982) posits that a firms pricing and conduct are determined by the
structural features of the market within which it operates and that a highly concentrated
industry is characterized by collusion among the few large firms in setting prices to
achieve abnormal profits. This theoretical view of the market structure hypothesis was
subsequently challenged by the efficient structure (ES) hypothesis of Demsetz (1973) and
Peltzman (1977). According to the ES hypothesis, efficient producing firms generate
higher sales through lower pricing. This would result in higher market share for efficient
firms leading to concentration. An understanding of the interrelationships between
market structure, efficiency and profitability is therefore necessary to inform both
competition and regulatory policies.

1.1 Motivation for the study

Since effective regulation requires a comprehensive understanding of consumer and
firm behaviour, there is a need for the insurance regulator to better understand the
dynamics of pricing behaviour among firms in the industry to formulate policies for a
stable industry. With different empirical studies having found mixed results regarding
the relationship between market structure and the pricing behaviour of firms, this
study seeks to extend regulators understanding of firm behaviour in emerging
markets. The coming into effect of the Insurance Act 724 (2006) coincided with
the dwindling in market share of the top five insurers in both life and non-life market.
This study seeks to find answers to the following questions, How has the structure of
the new markets (life and non-life markets) impacted on firms pricing behaviour?
While several studies have examined insurance markets in Europe and America[1],
very few studies have been carried out in African insurance markets[2] with only three
empirical studies[3] having been carried out on the insurance market in Ghana.
For example, Ansah-Adu et al. (2012) focused on cost efficiencies of both life and
non-life insurance companies while Akotey et al. (2013) also examined the financial
performance of life insurers in Ghana. The obvious omission from these two studies is the
link between insurers efficiency and profitability. Additionally, the effect of the structure
of the emerging Ghanaian insurance market on profitability has not been empirically
investigated. This study enhances the understanding of the industrial economics of the
Ghanaian insurance industry by investigating the impact of market structure and
efficiency on profitability. The main contribution of this study is the empirical application
of the classical industrial economics theory on SCP and ES paradigms to an emerging
insurance market in Africa. This study thus extends the work of Akotey et al. (2013) by
 IJOEM examining the effect of market structure on profitability of both life and non-life
10,4 insurers. With regards to Ansah-Adu et al. (2012), we further explore the relationship
between efficiency and profitability.
The rest of the paper is organized into Section 2 on the overview of both life and non-
life insurance markets in Ghana, Section 3 on related studies on the SCP and ES
paradigms, Section 4 on methodology and Section 5 discusses empirical findings.
650 Section 6 concludes the study and discusses the policy implication of the findings.

2. Overview of insurance industry in Ghana

Insurance first began in the Gold Coast way before attainment of independence in 1957.
The premier insurance company, the Royal Guardian Enterprise (now operates under
the name Enterprise Insurance Company (EIC) Limited) was established in 1924. Other
insurance companies established later included the Gold Coast Insurance Company,
General Insurance Company and Cooperative Insurance Society in 1955, 1957 and 1958,
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respectively. Within five years of independence, the first national insurance company,
the State Insurance Company (SIC), came to existence in 1962 through a merger of
Gold Coast Insurance Company and Cooperative Insurance Society. As at the end of the
year 2013, the insurance industry was made up of 25 non-life companies, 18 life
companies, two Reinsurance companies, 54 Broking companies, one Loss Adjuster, one
Reinsurance Broker, one Oil and Gas companyand about 4000 insurance agents (www.
nicgh.org) regulated by the by the National Insurance Commission (NIC). The NIC came
to operation when the then Insurance Law 1989 (PNDC Law 227) was promulgated,
however, the industry is now regulated by the Insurance Act, 2006 (Act 724). The Act
724 mandates the NIC with the supervising, regulating and controlling the business of
insurance in Ghana. The minimum start-up capital of US$1 million for an insurance
company was reviewed to US$5 million or in its cedi equivalent by the Insurance Act,
2006 (Act 724). This was done to improve upon the financial capacity of insurance
companies to enable them underwrite more risky businesses especially with the
discovery of oil in commercial quantities (NIC, 2010).
Table I presents the gross premiums written for both the non-life and the life markets
from 2007 to 2011. It is observed that the industry has experienced consistent growth in
premiums throughout the period. The gross premiums written for the non-life and the life
businesses increased to GH358,352,702 and GH270,176,073 in 2011 from GH142,020,077
and GH67,534,641 in 2007, respectively. The yearly growth rates of the premiums in both
markets are presented in Figure 1. It is evident that the premium growth rate of the life
markets has been consistently greater than the non-life market. This shows that life
insurance businesses has made it the leading contributor to the industrys total premium
income than the motor business which was hitherto the driving force behind the insurance
business in Ghana (NIC, 2010, 2011). It is worth noting that life insurance in Ghana hitherto

Non-life insurance Life insurance

2007 142,020,077 67,534,641

Table I. 2008 187,010,274 91,245,062
Growth in total 2009 220,704,263 122,269,456
gross premium 2010 270,773,967 187,343,779
income (non-life 2011 358,352,702 270,176,073
and life) (GHS) Sources: National Insurance Commission (NIC) Report (2010, 2011)
 60.00%
Non-Life Life 53.20% Insurance
50.00%
44.20% companies
40.00% 36.10% 35.10% in Ghana
34% 32.30%
31.60%
30.00%
23.90% 22.60%
18%
20.00% 651
10.00%

0.00% Figure 1.
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Growth rate in
Source: NIC (2006-2011) premium income

was equivalent to insurance against death. However, this phenomenon has changed,
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especially when the life insurance was separated from general business. Life insurance
now includes endowment policies, funeral and others (www.nicgh.org).

2.1 Life insurance market

Life insurance is mostly deemed a contract entered into between a policy holder and an
insurer in which the insurer is expected to pay a pre-determined sum of money upon
the death of the insured person to a person so designated by the policy holder in the
contract. Other forms could include pension, savings and health insurance. In cases of
pension and some life insurance, the policy holder may be the same as the beneficiary.
The birth of the life insurance business in Ghana came at the passage of the Insurance
Act (2006), Act 724. Up until the passage of Act 724, there was no clear distinction
between life and non-life insurance businesses as some companies were known to use
premiums from life to support non-life operations. However, with the passage of Act
724, a separation of the two was a must for every insurance company. The business of
insurance before the Act was mainly the type of policy under taken. These were mainly
life, fire, marine and miscellaneous. Aside the aforementioned powers of Act 724, the
act also forbids composite insurance companies. Thus by December 2008, all composite
insurance companies were expected to have separated their life and non-life operations
into different companies. This distinction was eminent to meet the fast growing
changes in insurance regulation and standards and to conform to global methodologies
as adopted by the International Association of Insurance Supervisors, the global head
of insurance business. For several years, there have been a phenomenal growth in life
business when compared to non-life business. This is likely to continue given the rate of
product innovation and development. Market share seems to be concentrated in the life
industry. In the sector, close to 78 per cent of the total life insurance premium goes to
only five out of the 18 life companies that existed as of 2011. The five are SIC life, Glico
life, Enterprise life, Star life and Metropolitan life insurance. Between these five
companies, they accounted for 77.7 per cent of total premiums in 2007, 76.9 per cent in
2008, 76.4 per cent in 2009, 73.7 per cent in 2010 and 77.5 per cent in 2011. Figure 2
illustrates the market share among these top five life insurance companies.

2.2 Non-life insurance market

According to NIC (2011), non-life insurance has always contributed a higher premium
to total insurance premium than that of life insurance. The growth in non-life premiums
 35.0
IJOEM SIC Glico ELAC Star MET Life
10,4 30.0

25.0

Percentages 20.0

15.0
652
10.0

5.0
Figure 2.
Premium distribution 0.0
in life insurance 2007 2008 2009 2010 2011
(Top 5 firms) Source: NIC (2006-2011)
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is largely driven by premiums form motor business, followed by accidents, then fire,
marine and the others. For motor, annual gross premium recorded was GH123.9
million for 2010 from a previous years figure of GH105.6 million and landed at
GH162.4 representing 25.8 per cent of the entire premiums for the year 2011.
Premiums from accident business for 2011 was GH78.9 million denoting a market
share of 12.6 per cent. This increment was on the back of GH71.8 million for 2010.
The figure for 2010 was an increase of nearly GH23 million above the 2009 figure.
Fire insurance made an annual income of GH77.7 million and market share of
12.4 per cent for the period ending 2011. It is believed that the compulsory insurance
of all commercial buildings which was to start on 1 August 2011 will help boost
the income for this line of business (NIC, 2011; www.ghanabusinessnews.com).
Most of the market premiums are underwritten by SIC Limited, EIC Limited,
Metropolitan Insurance Company Limited (MET), Vanguard Assurance Company
Limited and Star Assurance Company limited; this accounted for 72.69 per cent of
gross premiums in 2007, 68.03 per cent in 2008, 66.25 per cent in 2009, 63.13 per cent
in 2010 and 59.98 per cent in 2011. The entrant of six new firms between 2006
and 2009 led to a decline in the market share of the top five insurers (NIC, 2011)
(Figure 3).

3. Empirical studies on market power and ES hypotheses

Most empirical literature on market power hypothesis have mainly focused on banking
institutions in both developed and developing countries, majority of the studies have
been limited to USA and European banks with incongruous results. Most recent of
these include Tregenna (2009) and Maudos and de Guevara (2007). Studies across other
regions include Pakistan (Farooq, 2003), Australia (Sathye, 2005), Bangladesh (Samad,
2008) and Korea (Park and Weber, 2006), UAE (Al-Muharrami and Matthews, 2009;
Alzaidanin, 2003). In Africa, Mensi and Zouari (2010) focused on the Tunisian banking
system. Other industries examined under SCP include agriculture (Marion, 1976), pulp
and paper (Li et al., 2004), steel (Purkayastha, 2005), tourism (Tung et al., 2010) as well
as inter-industry (Lehman et al., 2004).
Fewer studies have examined the insurance industry. One of the earliest researchers
in the insurance industry that studied SCP hypothesis was Joskow (1973). In examining
the US non-life insurance industry competitive structure, he found that despite competitive
 40.00 Insurance
SIC EIC MET Vanguard Star
35.00 companies
30.00
in Ghana
Percentages

25.00

20.00 653
15.00

10.00

5.00 Figure 3.
0.00 Premium distribution
2007 2008 2009 2010 2011 in non-life insurance
(Top 5 firms)
Source: NIC (2006-2011)
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market structure, insurers set prices through cartel-like rating bureaus. The author
concludes that the collusive behaviour among insurers lead to the cuts in supply,
inefficient sales systems and over-capitalized industry.
Chidambaran et al. (1997) empirically analysed the economic performance across 18
different lines of the US property and liability insurance industry covering a ten-year
period from 1984 to 1993. The main was that profitability was driven by market
concentration to the SCP hypothesis. Bajtelsmit and Bouzouita (1998) also analysed the
SCP and ES hypotheses in the automobile market in USA from 1984 to 1992, the
authors found no evidence in support of the ES hypothesis. In extending the work of
Chidambaran et al. (1997) using a different data set on the US property and liability
insurance market, Choi and Weiss (2005) examined the market structure, efficiency and
performance over the period 1992-1998 using data at the company. By estimating both
revenue and cost efficiencies, they found evidence in support of the ES hypothesis to
indicate that cost-efficient firms charge lower prices and earn higher profits. Taking
motivation of regulatory differences in different state in the USA, Weiss and Choi
(2008) examined the SCP, relative market power (RMP) and ES hypotheses. They find
evidence to that market power is mostly exercised by insurers in non-stringently
regulated but competitive markets.
Meanwhile, Jedlicka and Adusei (2006) tested the SCP hypothesis on Austrian
insurance industry by considering a sample of 52 insurers between 2002 and 2003.
Although they find evidence to suggest the insurance market is concentrated, the SCP
hypothesis of collusive firms behvaiour was rejected. Pope and Ma (2008) examined
the SCP hypothesis on life insurance market from an international perspective by
employing a multiple regression analysis on a panel of 23 countries from 1996 to 2003
and found evidence in support of SCP hypothesis although they concluded that the
effect of market concentration on performance depended on the level of market
liberalization.
By employing data from 1980 to 2000, Liebenberg and Kamerschen (2008) examined
South-African auto insurance market and found no support for SCP hypothesis. In an
examination of the effect of liberalization on market structure and performance in the
non-life insurance industry in Eastern European countries, Njegomir and Stojic (2011)
employed a panel data from 2004 to 2008 to provide evidence in support of the SCP.
 IJOEM With motivation from restructuring and consolidation of the European insurance
10,4 markets, Berry-Stlzle et al. (2011) studied the SCP, RMP and ES hypotheses in the
property and liability insurance industry in 12 European countries from 2003 to 2007.
They find strong support for the ES hypothesis while the SCP was rejected. The findings
of the above studies provided strong evidence in support of the ES hypothesis.
This could be explained in terms of anti-competitive legislation that promotes easy
654 entry and exits which serves as a check on the collusive behaviour in concentrated
markets in these developed countries as per Baumol (1982) contestable market theory.
However in less developed financial markets in emerging economies like Ghana, market
imperfections and high levels of concentrations makes collusive behaviour very likely.
To this end, we seek to provide empirical evidence on the SCP and ES hypotheses in
a developing insurance market in Africa.
In examining profitability determinants of life insurers in Ghana, Akotey et al. (2013)
employed a panel of ten life insurers over a ten-year period to identify gross premium
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written, insurers size, reinsurance, claims, management expenses and interest rate as the
significant determinants of life insurers profitability in Ghana. The authors however, did
not consider the effect of the structure of the life insurance industry on profitability. Based
on the mixed results for the SCP hypothesis in empirical studies reviewed, this study
seeks to bring new evidence on the SCP hypothesis from a developing insurance market
undergoing structural changes. In this study, we employ the data envelopment analysis
(DEA) technique of Charnes et al. (1978) and Banker et al. (1984) to estimate both technical
and pure technical efficiency (PTE) scores for both non-life and life insurers while using
the structural measures of market structure in the form of the Herfindahl index and four-
firm concentration ratio (CR4). Unlike Liebenberg and Kamerschen (2008), we bring robust
evidence to our findings by considering other known correlates of profitability in leverage,
size, underwriting risk, GDP growth and inflation. Additionally, this study employs two
different estimation techniques in the panel corrected standard errors (PCSE) of Beck and
Katz (1995) and the random effects (RE) estimation to provide robust evidence on the
relationship between profitability and market structure and efficiency of both life and
non-life insurance market in Ghana.

4. Methodology
This section describes the empirical strategy employed to examine the relationship
between market structure, efficiency and profitability of Ghanaian insurance
companies. We first describe our choice of market structure proxies and how they
are measured. The DEA technique is employed to measure insurance efficiency. This
study employed a panel data set which covers 14 life and 22 non-life insurance
companies in Ghana covering the period 2007 to 2011. This sample was taken from the
18 life and 24 non-life insurance firms in operation during the study period. The 14 life
insurers account for about 95 per cent of premium market share while the 22 non-life
insurers also account for about 93 per cent of premium market share. The data are
contained in annual financial report of the sample as obtained from the NIC, the
regulator of the insurance industry.

4.1 Measures of market structure

Several metric measures have been provided by literature on how to measure the
market structure of an industry. Among these measures are the Herfindahl Hirschman
Index (henceforth HHI), the Lerner index and the concentration ratios. For the purpose
 of the study, both the HHI and concentration ratio (4-firm CR) were used to proxy the Insurance
structure of the Ghanaian life insurance market. The HHI is measured as the sum of companies
squares of the market share of firms within an industry.
This was computed by the formulae below:
in Ghana
X
n
HHIt ms2i
i1
655
where msi is the market share of insurer i. The market share is proxied as the ratio an
insurers premium to gross industry premium. The concentration ratios, which is
common indicator for the market structure measures the degree to which few dominant
firms within an industry account for greater portions of economic activities within the
market. This study employs the CR4 as it has been found to be the most preferred
concentration ratios (Scherer and Ross, 1990).
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4.2 Estimating efficiency: DEA

The DEA technique was employed in estimating efficiency. The DEA technique
measures the relative performance of firms by comparing multiple inputs and outputs.
The efficiency score is estimated as the ratio of the weighted sum of outputs to
weighted sum of inputs. Assuming n number of decision making units (DMUs), with m
inputs and s outputs, we obtain the relative efficiency score of a test DMU p through the
estimation of a model proposed by Farrell (1957) and made popular Charnes et al. (1978)
described below:
X
s
max h0 ur yr0
r1

X
s
subject to: vi xi0
i1

X
s X
s
ur yrj  vi xij p 0; j 1; 2; . . .; n (1)
r1 i1

ur ; vi X 0 r 1; 2; . . .; si 1; 2; . . .; m

where xij is the quantity of input i used by bank j, yrj is the quantity of output
r produced by bank j, and ur and vi refer to weights chosen for output r and input
i, respectively:

minh0 y

X
n
subject to: y0 xi0  lj xij X 0
j1
 IJOEM X
m
ljr yrj X yro
10,4 j1

lj 40
The input-oriented model above seeks to minimize cost in achieving a desired level of
656 output. An efficient DMU has an efficiency score , of 1 and serves as the bench mark
for the DMUs within in an industry and employing the same technology. The modelled
linear programming assumes constant returns to scale as per Charnes et al. (1978)
which implies that each DMU operate at their optimal scale and that any increase in
inputs will result in proportional increase in outputs. The efficiency scores estimated
under the assumption of constant returns to scale is called technical efficiency (TE)
which denotes the ability of firms to employ technology to maximize out. However,
when inputs changes results in disproportional changes in the output variables, the
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DMUs are said to be operating at variable returns to scale, which Banker et al. (1984)
describes as PTE.
4.2.1 Input and output variables. Based on three principal services provided by
insurers in the form of real services, risk pooling and risk bearing and intermediation
functions, there is a general consensus on what constitute input variables in efficiency
studies. The input variables are classified into labour input and capital inputs. While
labour inputs are classified into business services input and labour cost, equity capital
and debt capital make up capital inputs. Our choices of input and outputs variables
employed were influenced by data availability. In line with Ansah-Adu et al. (2012),
the input variables considered were total operating expenditure and equity capital.
Total operating expenditure proxy for both labour and business services input.
Although the issue of insurance output remains contentions in literature, we follow the
arguments of Leverty et al. (2004) to employ net premiums instead of claims incurred as
our choice of output. Since outputs have to be desirable, no insurer seeks to maximize
incurred losses. We also employ net income after tax as the other output measure.
The efficiency scores are estimated under the out-orientation based on the notion that
insurers seek to maximize their earned premiums and profits to be able to adequately
provide cover for any incurred losses. The descriptive statistics of the input and
output variables are presented in Table II[4].

4.3 Empirical model

The estimated market structure based on the HHI and CR4 in Section 4.1 and the
efficiency scores under both constant returns to scale (TE) and variable returns to
scale (PTE) are used to model the SCP and ES hypotheses, respectively. Profitability
is measured as the ratio of profit after tax to total assets. The empirical model to test
the hypotheses is presented below:
Ui;t ai b1 M S t b2 ESH i;t b3 X i;t ei;t (2)
where subscripts i and t denotes insurer and years, respectively, Y is the
profitability of insurers proxied as the return on assets, MS represents market
structure proxied by the HHI and CR4, ES represents efficiency scores estimated
under DEA technique namely TE and PTE, while X denotes list of both firm
specific and macroeconomic determinants of insurers profitability. i,t is the
disturbance term.
 Premiums Net profit Expenditure Equity
Insurance
companies
Non-life insurance in Ghana
Mean 8,302,143 475,539 9,246,518 7,675,981
SD 11,100,000 14,900,000 20,400,000 16,300,000
Min 1,682,000 115,000 10,300 199,822
Max 61,600,000 28,700,000 158,000,000 86,400,000
657
Life insurance
Mean 11,000,000 2,625,075 8,338,457 14,300,000
SD 14,100,000 5,544,575 9,232,396 17,200,000 Table II.
Min 29,005 532,2000 18,893 204,457 Summary statistics
Max 71,500,000 27,000,000 44,500,000 101,000,000 of input and
Note: All values in Ghana Cedis output variables
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4.3.1 Control variables. We control for three firm-specific variables in size, leverage and
risk. Inflation and GDP growth are also controlled to account for the effect of the
macroeconomic environment of insurers profitability. These variables are selected based
on the studies of Akotey et al. (2013) in examining profitability determinants in the
Ghanaian life insurance industry. A brief description of the variables are given below.
Size. This variable is measured as the natural logarithm of total assets. The relationship
between size and profitability is ambiguous. A positive relationship indicates the
benefits of economies of scale advantages while a negative relationship is attributed
to diseconomies of scale.
Risk. Insurers risk is proxied by the ratio of incurred losses to earned premiums.
This measure captures the uncertainty that premiums earned may not be enough to
cover for losses incurred under the policies underwritten. We hypothesize that insurers
with high-underwriting risk would be less profitable, hence a negative relationship
with profitability is expected.
Leverage. Insurer generate leverage from unearned premiums from unexpired
policies and any outstanding claim amount. The quality of investments from the
leverage assumed determines its impact on profitability. Hence, the relationship
between leverage and insurance becomes positive through sound investment choices
that generate revenues above expected losses. Bad investments decisions leads to a
negative leverage-profitability relationship. While studies like Adams (1996), Adams
and Buckle (2003) and Akotey et al. (2013) have found evidence in support of a positive
relationship, Malik (2011) and Ahmed et al. (2011) find an inverse leverage-profitability
relationship.
GDP growth. The confidence of every business environment in reflected in the
growth in the real economy as captured by the gross domestic product. Increasing
growth stimulates demand for services such insurance cover by businesses to provide
cover their expanding businesses. The growth would also lead to increasing demand
by consumers for goods and services. In this line, we expect GDP growth to have a
positive relationship with profitability through growth in premium income.
Inflation. Increases in interest rate arising from high-inflationary pressures means
that returns on investments also increases. Hence, we expect inflation to have a positive
effect on insurers profitability due to high investment yields. However, a negative
relationship can be experienced when incurred losses exceeds any gains in investment
 IJOEM returns. Additionally, the negative effect of inflation on real incomes means that
10,4 increasing inflation would result in reduced sale by insurance companies.
Equation (2) is thus expanded to form Equation (3) as described below:
ROAi;t ai b1 M P t b2 EH i;t b3 SI Z E i;t b4 LEV i;t b5 RI SK i;t
b6 GDP t b7 I N F t ui ei;t (3)
658
where ROAi,t is the return on assets for insurer i in year t. Return on assets is defined as
the ratio of profit after tax to total assets. ui denotes the firm specific-fixed effects (FE)
whiles ei,t represents the firm-specific unobservable effects which vary over time.
The measurements of the independent variables are presented Table III.

4.4 Estimation procedure

The panel data methodology employed in this study enables a better identification and
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measurement of phenomenon that are not captured in either cross-sectional or time

series models. This allows for the modelling and testing of complex behavioural models
(Baltagi, 2001). The structure of the error terms in panel data modelling makes the
ordinary least estimations an inefficient and biased estimator of panel models. The
time-series increases the likelihood of correlation between the error terms of different
periods. Additionally, the assumption of homoskedasticity does not always hold for
panel data models. In estimating panels models therefore, Beck and Katz (1995) argued
that by considering the presence of non-spherical error terms (the presence of
autocorrelation or heteroskedasticity), the OLS can be an efficient technique for the
estimation of panel data models. Accordingly, the authors proposed the ordinary least
squares panel-corrected standard errors (OLS-PCSE) to replace the OLS standard
errors in an OLS estimation, making the OLS robust to the presence of non-spherical
error terms. This study therefore employs the OLS-PCSE after the providing evidence
of heteroskedasticity and autocorrelation. Panel data models are traditionally estimated
using the fixed or RE. The choice of either is influenced by the Hausman (1978) test
under the null hypothesis of RE model. We test the robustness of the OLS-PCSE
estimation by employing the Hausman test to select between the fixed effects (FE) and
RE estimations.

5. Results and discussion of findings

Presented in Table IV is the indicators for the structure of both non-life and life markets
in the CR and the HHI. Consistently across all the study period, the life market is highly

Variable Measurement Expected signs

Return on assets Profit after tax to total assets ratio

Independent variables
Market power HHI/CR4
Efficiency Estimated using the DEA (TE, PTE) +
Size Natural logarithm of total assets
Leverage Liabilities to assets ratio
Risk Incurred losses to premiums ratio
Table III. GDP GDP growth rate +
Variables description Inflation Inflation rate
 concentrated than the life markets. This probably reflected by the high number of firms Insurance
in the non-life market as opposed to fewer firms in the life market. companies
The results of the efficiency scores estimated using the DEA technique under
intermediation approach assuming both constant returns to scale (TE) of Charnes et al.
in Ghana
(1978) and variable returns to scale (PTE) of Banker et al. (1984) are presented in
Table V. Across both technical and PTE scores, life insurers have exhibited higher
efficiency scores compared to non-life insurers implying that life insurers in Ghana 659
are more efficient in resource utilization compared to their non-life counterparts. This
findings support the findings of Ansah-Adu et al. (2012) who examined the cost
efficiency of insurance companies in Ghana.
As shown in Table V, obvious differences exist among the efficiency scores for both
life and non-life insurers. Table VI presents the results of both Kruskal-Walis and Man
Whitney U-tests for differences mean values for both technical and PTEs. As indicated,
significant differences was found between the TE scores for life and non-life insurers at
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10 per cent but no significant differences was found for PTE. This indicates that life
insurance firms in Ghana have the ability to better maximize their outputs from the
production inputs compared to insurers in the non-life market.

Non-life Life
Years CR4 HHI CR4 HHI

2007 0.6700 0.1723 0.6956 0.1554

2008 0.5800 0.1306 0.6766 0.1478
2009 0.5900 0.1126 0.6665 0.1377
2010 0.5400 0.1054 0.6538 0.1386 Table IV.
2011 0.5100 0.0985 0.7086 0.1570 Indicators of
Source: Authors estimation from NIC Data (2007-2011) market structure

Non-life Life
TE PTE TE PTE

2007 0.290 0.570 0.7337 0.8780

2008 0.778 0.885 0.8051 0.8908
2009 0.773 0.857 0.7381 0.8795 Table V.
2010 0.617 0.779 0.6948 0.8458 Efficiency of
2011 0.692 0.759 0.7582 0.8453 Ghanaian insurers
Source: Authors Computation from EMS (2007-2011)

TE PTE

Life 0.752 0.871

Non-life 0.651 0.782
Kruskal-Walis 2 2.995* 1.686 Table VI.
Man-Whitney U-test: z 1.736* 1.34 Test for mean
Note: *Significant at 10 per cent level differences
 IJOEM 5.1 Descriptive statistics
10,4 Table VII presents a summary statistics of the regression model variables. Insurers
profitability, earnings before interest and taxation is on average 6 per cent of total
assets for life insurers compared to 3.3 per cent for non-life insurers over the study
period. Over the period, the concentration ratios for the four largest insurers (CR4) were
57.8 and 67 per cent for non-life and life insurers, respectively indicating a degree of
660 market concentration. The HHI as a measure of market structure confirms that the life
insurance market is more concentrated compared to the non-life market. On the efficiency
scores, both PTE and TE for life insurers were higher than that of non-life insurers
implying that Ghanaian life insurers are more efficient compared to non-life insurers.
Insurers size, leverage ratio and underwriting risk were 15.977, 60.2, 18.1 per cent,
respectively for non-life insurers with the corresponding ratios for life insurers of 16.2, 33
and 36 per cent, respectively. On the macroeconomic variables, inflation rate and GDP
growth rate averaged 13.188 and 8.256 per cent, respectively over the study period.
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5.2 Correlation matrix

In examining the possibility of high correlation among the independent variables, the
Pearson correlation coefficient was estimated and the results is presented in Table VIII.
There is strong and significant correlation between both market structure measures
and efficiency scores for both life and non-life insurers. With regard to the correlations
between the independent variables to test for the presence of multicollinearity,
correlation coefficients of less than 0.5 was found among pairs of the independent
variables giving an indication that potential multicollinearity problems will not be
encountered in using all the independent variables in the regression equation.

Mean SD Min. Max.

Non-life
ROA 0.033 0.0847 0.199 0.177
HHI 0.124 0.027 0.098 0.172
CR4 0.578 0.054 0.510 0.670
PTE 0.782 0.248 0.173 1.000
TE 0.651 0.281 0.117 1.000
SIZE 15.977 1.085 13.951 18.822
LEV 0.765 0.214 0.216 0.982
RISK 0.181 0.279 0.163 2.261
GDP 8.256 3.454 3.990 14.390
INFL 13.188 4.015 8.730 19.250
Life insurance
ROA 0.06 0.16 0.43 0.47
HHI 0.14 0.01 0.10 0.16
CR4 0.67 0.04 0.51 0.71
PTE 0.87 0.15 0.51 1.00
TE 0.75 0.18 0.38 1.00
SIZE 16.28 1.16 13.30 18.71
LEV 0.67 0.22 0.23 0.77
RISK 0.36 0.18 0.02 0.77
Notes: ROA, return on assets; HHI, Herfindahl Hirschman Index; CR4, four firm concentration ratio;
Table VII. PTE, pure technical efficiency; TE, technical efficiency; SIZE, insurers size; RISK, underwriting risk;
Summary statistics LEV, leverage; GDP, economic growth rate; INFL, inflation rate
 ROA HHI CR4 PTE TE SIZE LEV RISK GDP INFL Insurance
Non-life insurance
companies
ROA 1 in Ghana
HHI 0.002 1
CR4 0.07 0.85*** 1
PTE 0.28*** 0.22** 0.07 1
TE 0.40*** 0.39*** 0.24** 0.72*** 1 661
SIZE 0.08 0.23** 0.25** 0.01 0.001 1
LEV 0.54*** 0.22** 0.09 0.04 0.11 0.11 1
RISK 0.46*** 0.14 0.16 0.11 0.19* 0.28** 0.01 1
GDP 0.14 0.36*** 0.20*** 0.12 0.02 0.20* 0.08 0.14 1
INFL 0.245** 0.08 0.40*** 0.27** 0.30*** 0.15 0.16 0.04 0.393*** 1
Life insurance
ROA 1
HHI 0.09 1
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CR4 0.15 0.96*** 1

PTE 0.57*** 0.17 0.2 1
TE 0.70*** 0.15 0.19 0.63*** 1
SIZE 0.36*** 0.17 0.19 0.07 0.19 1
LEV 0.01 0.15 0.17 0.29** 0.03 0.2 1
RISK 0.42*** 0.03 0.06 0.30** 0.25** 0.22* 0.32***
GDP 0.18 0.34*** 0.42*** 0.1 0.01 0.22* 0.1 0.12 1
INFL 0.25** 0.26** 0.08 0.07 0.02 0.15 0.05 0.09 0.41*** 1
Notes: ROA, return on assets; HHI, Herfindahl Hirschman Index; CR4, four firm concentration ratio;
PTE, pure technical efficiency; TE, technical efficiency; SIZE, insurers size; RISK, underwriting risk;
LEV, leverage; GDP, economic growth rate; INFL, inflation rate. ***,**,*Significant at the 1, 5, and Table VIII.
10 per cent levels, respectively Correlation matrix

5.3 Regression results

As discussed earlier, the OLS-PCSE estimation provides consistent regression estimates
after correcting for either heteroskedasticity or autocorrelation or both. The Breusch and
Pagan (1979) test for heteroskedasticity and Wooldridge (2002) test for autocorrelation were
employed. In providing justification for the use of PCSE, evidence was provided for the
presence of heteroskedasticity for both non-life and life samples but autocorrelation was
only present in the life sample. The reliability and validity of the regression results
are indicated by the Wald 2 which tests the joint significance of the independent variables
in explaining the variations in profitability. With all the probability values of the 2 test
(ProbW 2) less than 0.05, we conclude that the model variables significantly explain
profitability of insurance companies in Ghana. Additionally, the R2 indicates that on the
average, about 60 per cent of variations in profitability of non-life insurers are explained by
the model whereas for the life insurance market, about 70 per cent variations in profitability
are explained by the model variables. The results of these tests are provided in Table IX.
From Table IX, the SCP hypothesis was rejected in all estimations using the two
different measures of market structure. In the non-life insurance model, inconsistent
evidence was found for the SCP hypothesis. Using the HHI as a proxy for market
power, a significant positive relationship was found at 10 per cent whereas a negative
and significant relationship at 10 per cent when CR4 proxied for insurance market
structure. This results clearly does not provide strong evidence for the SCP hypothesis
in the non-life insurance market in Ghana. The tendency for firms to follow market
 IJOEM Dependent variable: return on assets
10,4 Non-life insurance Life insurance
Model 1 Model 2 Model 3 Model 4 Model 1 Model 2 Model 3 Model 4

Constant 0.23 0.27 0.04 1.29 0.85*** 0.732*** 0.788*** 0.692***

HHI 0.22 2.99* 1.59*** 1.131**
CR4 0.35 2.50* 0.489*** 0.318**
662 PTE 0.45*** 0.46*** 0.454*** 0.443***
TE 0.70*** 0.71*** 0.392*** 0.384***
SIZE 0.02 0.02 0.02 0.02 0.06*** 0.058*** 0.065*** 0.059***
RISK 0.70*** 0.57*** 0.70*** 0.57*** 0.42*** 0.366*** 0.431*** 0.372***
LEV 0.40*** 0.32*** 0.39*** 0.32*** 0.08** 0.0001 0.091** 0.002
GDP 0.00 0.01 0.002 0.01 0.0002 0.003 0.001 0.004
INF 0.03*** 0.05*** 0.03*** 0.05*** 0.008*** 0.009*** 0.007*** 0.009***
R2 0.6131 0.6741 0.6133 0.6764 0.7252 0.7126 0.7285 0.7018
Adj. R2 0.575 0.642 0.5752 0.6445 0.6926 0.6785 0.6963 0.6664
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Wald 2 (7) 82.37 128.94 82 131.22 100.88 147.81 109.67 137.72

Prob W 2 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
Hettest 5.28 7.45 5.36 7.39 8.5 15.11 8.71 14.82
Prob W 2 0.0215 0.0064 0.0206 0.0066 0.0036 0.0001 0.0032 0.0001
AR (1) 0.0096 0.611 0.075 1.074 10.828 47.081 10.465 47.256
Prob W F 0.7618 0.4475 0.7886 0.3176 0.0059 0.0000 0.0065 0.0000
Insurers 22 22 22 22 14 14 14 14
Observations 79 79 79 79 67 67 67 67
Notes: HHI, Herfindahl Hirschman Index; CR4, 4 firm concentration ratio; PTE, pure technical
Table IX. efficiency; TE, technical efficiency; SIZE, insurers size; RISK, underwriting risk; LEV, leverage; GDP,
OLS panel-corrected economic growth rate; INFL, inflation rate; Hettest, heteroskedasticity test; AR (1), autocorrelation test.
standard errors ***,**,*Significant at 1, 5, and 10 per cent levels, respectively
estimation Source: Authors Estimation in STATA12

leaders in their pricing conduct could explain the conflicting evidence for the SCP; such
behaviour characterizes oligopolistic markets where market leaders compete against
each other. The proxies for ES (PTE and TE) exhibited significant positive relationships
with return on assets at 1 per cent to provide support for the ES hypothesis. This implies
that efficient non-life insurance firms produce at a lower prices to drive up sales and
market share, hence higher profitability. This results is consistent with the findings of
Liebenberg and Kamerschen (2008) who found mixed results[5] for the SCP hypothesis in
the South-African Auto insurance market.
With regard to the life model, the coefficients of market power (HHI and CR4) are
negative and statistically significant at between 5 and 1 per cent. This indicates that a
competitive life insurance industry leads to higher profitability implying a rejection of the
SCP hypothesis in the Ghanaian life insurance industry and denotes the absence of
collusive behaviour in the non-life market. This result is also consistent with the findings
of Choi and Weiss (2005), Jedlicka and Adusei (2006) and Berry-Stlzle et al. (2011).
Evidence was also found for the ES hypothesis as indicated by the positive significant
coefficient of TE and PTE at 1 per cent. This implies that profitability of life insurers in
Ghana thus results from efficient firms being able to lower per unit cost to sell more
products to capture larger market.
For the control variables, underwriting risk, leverage and inflation exhibited
significant relationships with profitability of non-life insurers in Ghana whereas size,
underwriting risk, leverage and inflation rate exhibited significant relationship with life
 insurers profitability. For insurers size, larger life insurers exhibited significant positive Insurance
relationship with profitability which could imply the benefits of economies of scale companies
enjoyed by larger firms. This results is consistent with Akotey et al. (2013) on Ghanaian
life insurers. This relationship was significant at 1 per cent. However, larger non-life
in Ghana
insurers were found not able to leverage on their size to earn higher profitability as
indicated by insignificant relationship between size and profitability in the non-life model.
Underwriting risk which indicates the riskiness of the insurance business exhibited 663
significant negative relationship with return on assets in both non-life and life models at
significance of 1 and 5 per cent, respectively. As insurers underwrite high-risky policies,
the likelihood of high-claims payout reduces underwriting profits, hence reduced return on
the insurers assets all other things being equal. This effect of risk on profitability for the
non-life insurance market was greater than that of the life insurance market. This indicates
that selling more risky insurance business leads to high-claims payment, hence reduced
profitability. The non-life market would therefore benefit stringent regulatory policies that
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improve underwriting practices. These results are consistent with Akotey et al. (2013).
Leverage exhibited mixed relationships with profitability for non-life and
life models. For non-life models, leverage exhibited significant positive relationship
at 1 per cent implying that highly levered non-life insurers are profitable. For the life
model however, a significant negative relationship was exhibited between leverage and
profitability. On the macroeconomic variables, only inflation rate exhibited significant
relationship with profitability for both non-life and life insurers. The relationship between
inflation rate and insurers profitability was negative at a 1 per cent significance level
confirming the findings of Akotey et al. (2013) who reported similar relationship for the
life insurance industry in Ghana.

5.4 Robust analysis; RE estimation

In examining the robustness of the results presented in Table X, both the random and
FE estimations were considered. In choosing between the most efficient estimators, the
Hausman (1978) specification test was employed and the results as shown in Table IX
favoured the RE estimation. With heteroskedasticity and autocorrelations established
through the Breusch and Pagan (1979) test and Wooldridge (2002), respectively, the RE
estimation was carried in the presence of heteroskedasticity and serial correlations.
Consistent with the OLS-PCSE estimations, the results for the SCP hypothesis was
mixed for the non-life sample by exhibiting significant positive relationship with
profitability using HHI as a proxy market structure whilst exhibiting negative
relationship with profitability using concentration ratio to proxy market structure.
These relationships were significant at 10 per cent. For the life model, the SCP
hypothesis was rejected in all four models with the market structure (HHI and CR4)
either exhibiting significant or insignificant negative relationship with profitability.
Consistent with the basic estimation, the ES hypothesis was accepted for both life and
non-life samples in the RE estimations.

6. Conclusions and recommendations

This paper sought to examine how the structure of both non-life and life insurance
markets in Ghana has impacted on the behaviour of firms with regards to their pricing
policies after the enactment of the Insurance Act 724 (2006) which led to the separation of
both life and non-life businesses. By empirically testing the SCP and ES hypotheses on
the insurance industry in Ghana, this study provides an understanding of firm behaviour
in the new markets created to inform regulatory and competition policies.
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10,4

664
IJOEM

Table X.

error terms
heteroskedastic
Random effects
estimations with

and autocorrelated
Dependent variable: return on assets
Non-life insurance Life insurance
Model 1 Model 2 Model 3 Model 4 Model 1 Model 2 Model 3 Model 4

Constant 0.205 0.174 0.254 1.379* 0.809*** 0.601*** 0.753** 0.569 **

HHI 0.006 2.323* 1.732* 1.114
CR4 0.210 2.019* 0.560** 0.332
PTE 0.367** 0.379** 0.434*** 0.428***
TE 0.566*** 0.579*** 0.370*** 0.362***
SIZE 0.001 0.003 0.004 0.001 0.063*** 0.052*** 0.067*** 0.054***
RISK 0.549*** 0.497*** 0.547*** 0.501*** 0.451*** 0.396*** 0.453*** 0.400***
LEV 0.362*** 0.304*** 0.360*** 0.301*** 0.054 0.011 0.057 0.013
GDP 0.004 0.011 0.001 0.010 0.001 0.004 0.001 0.004
INF 0.031*** 0.045*** 0.031*** 0.043*** 0.008*** 0.010*** 0.007*** 0.009***
Wald 2 2833.29 3103.66 2773.27 3070.12 103.64 185.42 99.1 174.32
2
Prob W 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
R2 0.608 0.6693 0.6084 0.672 0.668 0.6937 0.6736 0.6923
Adj. R2 0.5694 0.6367 0.5698 0.6397 0.6286 0.6574 0.6349 0.6558
Hausman 7.8 6.84 3.10 5.17 1.74 1.32 1.72 1.39
Prob W2 0.1676 0.336 0.3771 0.3956 0.9729 0.9878 0.9738 0.9867
Insurers 22 22 22 22 14 14 14 14
Observations 79 79 79 79 67 67 67 67
Notes: HHI, Herfindahl Hirschman Index; CR4, four firm concentration ratio; PTE, pure technical efficiency; TE, technical efficiency; SIZE, insurers size;
RISK, underwriting risk; LEV, leverage; GDP, economic growth rate; INFL, inflation rate. ***,**,*Significant at 1, 5, and 10 per cent levels, respectively
Source: Authors Estimation in STATA12
 Based on our structural measures of market structure, both markets have levels of Insurance
concentration with the premiums concentrated among the four biggest insurers. companies
However, the life market is highly concentrated than the non-life market. From the
DEA, we also conclude that the life insurers are more efficient compared to non-life
in Ghana
insurers. In the non-life market, we find inconclusive evidence in support of the SCP
hypothesis but strong evidence is alluded for the ES hypothesis that profitability is
driven by efficient producing insurers. For the life market, we find also find strong 665
evidence for the ES hypothesis while rejecting the SCP hypothesis. We also identified
underwriting risk, leverage and inflation as the other significant determinants of
profitability in both markets. Most importantly, the effect of underwriting risk on
profitability is more pronounced in the non-life market compared to the life market.
Larger life insurers were also found to be more profitable than small life insurers.
In conclusion, we do not find any evidence of collusive behaviour in the concentrated
insurance markets in Ghana.
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The results of this study have implications for the regulation of insurance
markets in Ghana and other developing countries. The rejection of the SCP hypothesis
coupled with the high levels of concentration in both markets indicates that
competition policies would not only lead to increased profitability but also improve
consumer welfare. Hence, we recommend that efforts aimed at promoting competitive
industry should be accelerated within a conducive framework to promote healthy
competition among industry players. Management of insurance companies should
also aim to develop manpower and invest in new technology to improve efficiency.
This could result in new product development and effective delivery systems to
maximize resource usage. Adherence to the best underwriting practices should be
pursued at both the regulatory level and firm level to reduce the risk inherent
in premium underwriting. This recommendation therefore re-enforces the decision
by the NIC in the adoption of the risk-based supervision framework and also in line
with the solution proffered by Akotey et al. (2013). Other significant determinants
of profitability identified could serve a benchmark for insurance companies in
improving profitability.
It is the recommendation of this study that future researchers could examine the
effect of competitive insurance market on efficiency of insurers. Other forms of
efficiency such as profit and revenue efficiency as well as different forms of insurance
profitability could also be examined in both markets. Data limitations made it
impossible for this current study. Productivity analysis of the Ghanaian insurance
market could also be an area of interest for further studies. From a methodological
perspective, a dynamic panel estimation can employed to deal with a potential of
endogeneity common with panel data models as well as examine the persistence of
insurers profitability in Ghana.

Acknowledgements
The authors are grateful to the Editor and Area Editor Professor Ronald Schramm for
their comments. Constructive comments from two anonymous reviewers which greatly
improved an earlier draft of the paper is appreciate. The authors also appreciated the
help of Cosmos Owusu of the National Insurance Commission in providing us with the
data. The paper was prepared while the first/corresponding author was a Teaching
Assistant at the Department of Finance, University of Ghana Business School. An
earlier draft of the paper was presented at the 1st University of Ghana Business School
Conference on Business and Development, April 8-9, 2013, Accra, Ghana.
 IJOEM Notes
10,4 1. Chidambaran et al. (1997), Choi and Weiss (2005), Jedlicka and Adusei (2006), Berry-Stlzle
et al. (2011).
2. Jones et al. (1999), Liebenberg (2000), Theron (2001) and Liebenberg and Kamerschen (2008)
have all examined the South African Insurance market.
3. Ansah-Adu et al. (2012), Akotey et al. (2013) and Akotey and Abor (2013).
666
4. Firms with negative values were excluded from the efficiency analysis.
5. Generally, the SCP hypothesis was rejected for most indicators of market structure except ten
firm concentration ratio.

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Further reading
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industry: a test of the quiet life and related hypotheses, Review of Economics and
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paradigm in banking, Journal of Financial Services Research, Vol. 1 No. 3, pp. 277-294.
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in Spanish banking, Journal of Banking and Finance, Vol. 18 No. 3, pp. 433-444.
 Molyneux, P. and Forbes, W. (1995), Market structure and performance in European banking, Insurance
Applied Economics, Vol. 27 No. 2, pp. 155-159.
companies
Rhoades, S.A. (1985), Market share as a source of market power: implications and some
evidence, Journal of Economics and Business, Vol. 37 No. 4, pp. 343-363.
in Ghana
Shepherd, W.G. (1986), On the core concepts of industrial economics, in De Jong, H.W. and
Shepherd, W.G. (Eds), Mainstreams in Industrial Organization, Vol. 6, Kluwer Academic,
Boston, MA, pp. 23-67. 669
About the authors
Abdul Latif Alhassan is currently pursuing his PhD in Business Administration (Finance) at the
Graduate School of Business, University of Cape Town, South Africa. His research interests are in
insurance economics, efficiency and productivity analysis, development finance, econometric
modelling and industrial organization theory. He has undertaken ad-hoc Refereeing for the
Journal of Risk Finance, International Journal of Emerging Markets and The Journal of
International Trade and Economic Development. Abdul Latif Alhassan is the corresponding
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author and can be contacted at: lateef85@yahoo.com

George Kojo Addisson is the Managing Director of StarLife Insurance Company in Ghana
with over ten years experience in the Ghanaian insurance industry. He has an MBA in finance at
the University of Ghana Business School.
Michael Effah Asamoah is a Lecturer at the Central University College in Ghana. He is
also a Chartered Accountant and has an MPhil in finance from the University of Ghana
Business School. His research interests are in foreign direct investment and macroeconomic
uncertainties.

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