A review of the literature on “determinants of insurers’ capital structure”

Abstract

Capital structure plays an essential role in the financial decision-making of a company by strengthening financial performance and worth. This research aims to provide a literature review to identify the factors that affect insurance companies’ capital structure. The paper focuses on articles published from 2010 to 2021 on insurance companies’ capital structure in developing countries were reviewed. Three theories were identified as having common determinants: trade-off, pecking order, and agency cost. These independent determinants include seven firm-specific determinants: company size, age, profitability, growth, liquidity, tangibility, and risk along with two macroeconomic determinants: economic growth and inflation rate. The research found that the leverage ratio is the primary measurement of capital structure used as a dependent variable. Furthermore, previous studies have shown that the static data model was the most appropriate framework in most research. This research provides future researchers with information on understanding the determinants of capital structure in the insurance field.