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FOREIGN DIRECT INVESTMENT AND FINANCIAL PERFORMANCE: A CASE OF NSE LISTED INSURANCE COMPANIES WITH FOREIGN OWNERSHIP

Isabella Michelle Fernandez - Masters Student, St. Paul’s University, Kenya

Dr. John Muhoho - Lecturer, St. Paul’s University, Kenya

Dr. Julius Kahuthia - Lecturer, St. Paul’s University, Kenya


ABSTRACT

Foreign Direct Investment (FDI) not only provides the African countries with much needed capital for domestic investment, but also creates employment opportunities, helps transfer of managerial skills and technology, all of which contribute to economic development. The objective of this study was to assess the effect of Foreign Direct Investment on performance of Listed Insurance Companies in Kenya with specific focus on tax regime. The study used a longitudinal research design covering a 6 year period between 2013 and 2018. The target population of the study was six NSE listed insurance companies with foreign ownership. The study undertook a census involving all the six companies therefore no sampling was done. Using STATA version 12, descriptive and panel regression analysis was used to determine the relationship between the independent and dependent variables. Data was interpreted and presented in form of tables. Three panel regression models, that is, pooled OLS model, the fixed effects model and the random effects models were subjected to diagnostic tests. Fixed model was selected as the most appropriate model and was used to interpret the findings. The findings of the study revealed that tax regime had a negative and significant effect on performance with a p value of 0.004. The study concluded that an increase in tax caused a decline in performance of listed insurance companies. The study therefore recommended that policy makers should direct effort towards improving these factors so as to attract more foreign direct investment to the insurance sector given that they affect performance.


Full Length Research (PDF Format)