VIDYASAGAR UNIVERSITY JOURNAL OF COMMERCE

A SURVEY ON THE RECAPITALISATION, MERGERS AND ACQUISITIONS OF THE NIGERIAN INSURANCE INDUSTRY
Table - 26: Combination of question numbers 7 and 9 were used to test the above
stated hypothesis
ITEM SA A U D SD TOTAL
O E O E O E O E O E
7 2 1.0 6 3 9 4.5 15 7.5 22 11 54
9 21 10.5 27 13.5 3 1.5 2 1 1 0.5 54
TOTAL 23 33 12 17 23 108
Computation of expected frequency
e = r T x c T
G T
E 1 =1, E 2 = 3, E 3 = 4.5, E 4 = 4.5, E 5 = 11, E 6 = 10.5, E 7 = 13.5, E 8 = 1.5, E 9 = 1.0, E 10 = 0.5.
Application of chi-square statistical tool for hypothesis testing:
O E (O - E) (O - E) 2 (O - E) 2 /E
2 1.00 1.00 1.00 1.00/1.00 = 1.00
6 3.00 3.00 9.00 9.00/3.00 = 3.00
9 4.50 4.50 20.25 20.25/4.50= 4.50
15 7.50 7.50 56.25 56.25/7.50 = 7.50
22 11.00 11.00 121.00 121.00/11.00= 11.00
21 10.50 10.50 110.25 110.25/10.25= 10.25
27 13.50 13.50 182.50 182.50/18.50 = 13.50
3 1.50 1.50 2.25 2.25/1.50= 1.50
2 1.00 1.00 1.00 1.00/1.00= 1.00
1 0.50 0.50 0.25 0.25/0.50 = 0.50
χ 2 = 53.75
The test statistic (TS) = 53.75, the corresponding χ 2 at 4 DF which has q(0.05) = 2.776.
Since TS > q(0.05), H o is rejected, while H i is accepted. It thereby follows that mergers and
acquisitions will be a solution for some insurance companies to remain in business.
Conclusion
The paper revealed how recapitalization has been enhancing the development of insurance
industry and how mergers and acquisitions can be an option for some insurance companies
to remain in business. Insurance and reinsurance companies that are perceived as safe and
well managed in the market place is likely to obtain more favourable terms and conditions in
its relationship with investors, creditors, and other parties than one that is perceived as weak
and more risky. The recent capital base set by the Federal Government of Nigeria for the
insurance and reinsurance companies should be seen as an opportunity that could enable
local players take jobs outside the country after the consolidation exercise. The insurance
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Vidyasagar University Journal of Commerce