An Event Study Analysis of International Ventures between Banks and Insurance Firms
Posted: 27 Nov 2008 Last revised: 2 Jul 2009
Date Written: 2009
The current study examines the effects on shareholders wealth as a result of the bank-insurance interface. Using a global sample of financial intermediaries and an event-study framework the findings reveal significant abnormal returns surrounding the announcement of bank-insurance ventures. A control sample using financial institutions that do not pursue bank-insurance deals shows negative abnormal returns with much higher magnitude in absolute terms. When the sample is separated on the basis of the bidder's nature, then bank-bidders earn significant positive returns, while the insurance-bidders experience significant losses. The analysis further unveils either statistically significant negative returns or insignificant values for bank-insurance divestments. Finally, profitability, size and functional diversification are all found significant in determining abnormal returns over various intervals.
Keywords: Bank-insurance interface, Divestments, Financial conglomerates, Event study, Abnormal returns
JEL Classification: G14, G21, G22
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