What drives the capital structure? The case of non-life insurance companies in Serbia

This paper studies the factors behind the capital structure of insurance companies. We used financial reports of non-life and composite insurance companies in Serbia between 2006 and 2019. In particular, we apply a panel-data approach to examine the relationship between leverage, defined as the ratio of technical reserves to capital and various firm-level characteristics. The coefficients estimated using the individual fixed-effects model indicate a significant and negative influence of profitability, growth and liquidity measures on leverage and a significant and positive influence of company size. The results indicate that the tradeoff theory and the pecking order theory are relevant in explaining the non-life insurer capital structure in Serbia.