Financial Performance sits at the core of a firm’s ability to meet the expectations of its stakeholders and create sustainable value. The history of insurance in Nigeria traces back to the pre-colonial era with the creation of the Royal Exchange Assurance Agency in 1918. The industry, however, is arguably one of the least performing sectors within the Nigerian economy and the financial service sector in particular. Recapitalization reforms have been acknowledged as one of the actions that improve the financial performance of firms, this study, therefore, gauged the impact of recapitalization on the financial performance of the insurance industry in Nigeria. The study adopted the Expected Bankruptcy Cost Hypothesis, Signalling Theory and Risk-Return Hypothesis to underpin the impact of Recapitalisation reforms on the performance of firms. Using Purposive Sampling technique, the study selected the top 12 (contributing 74% of total insurance industry revenue in 2018) insurance companies in Nigeria from 2009 to 2018 and used annual reports obtained from the company’s corporate website to select variables of interest. Using Shareholders Funds (SHF) as a proxy for recapitalization and Gross Written Premium (GWP), Profit before Tax (PBT), Total Assets (TA) and Capital Employed (CE) as proxies for financial performance, Least Square regression result show a positive and substantial relationship between recapitalization and the financial performances of firms. The study, therefore, recommends that the upcoming recapitalization reforms in the insurance sector be embraced by all stakeholders as evidence suggest that the industry would be in a better financial state and well-positioned to take on large/complex in-country risk thereby forestalling capital flight.
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