Universal Banks and Stock Market Reaction: Some Evidence from Major Announcements

Journal of Risk Finance, Vol. 10, pp. 244-260, 2009

Posted: 25 Nov 2007 Last revised: 2 Jul 2009

See all articles by Sotiris K. Staikouras

Sotiris K. Staikouras

City University - Cass Business School; ALBA Graduate Business School

Haris Harissis

Independent

Andreas G. Merikas

University of Piraeus

Stanley Mutenga

City University - Cass Business School

Date Written: January 30, 2009

Abstract

The current study investigates the interface between the banking and insurance sector. The empirical findings are based on well-known financial intermediaries taken from an international sample. The analysis employs an event study methodology to evaluate the equity performance of these institutions. The magnitude and sign of equity returns appear to differ among the particular cases examined. Some firms exhibit considerable abnormal returns, while others remain passive to any corporate restructuring revelation, or even undrape stock market losses. In many cases, the latter is associated with the overall economic environment, and/or with investments which are not compatible with the general banking philosophy of 'fast growth within short-term horizons'. Based on equity returns, the bank-insurance interface seems to be the most preferable business restructuring; while insurance divestments and horizontal mergers, among financial intermediaries, do not perform as profitably as expected.

Keywords: Bank-insurance interface, Insurance divestments, Financial conglomerates, Event study, Abnormal equity returns

JEL Classification: G14, G21, G22

Suggested Citation

Staikouras, Sotiris and Harissis, Haris and Merikas, Andreas G. and Mutenga, Stanley, Universal Banks and Stock Market Reaction: Some Evidence from Major Announcements (January 30, 2009). Journal of Risk Finance, Vol. 10, pp. 244-260, 2009, Available at SSRN: https://ssrn.com/abstract=1032188

Sotiris Staikouras (Contact Author)

City University - Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

ALBA Graduate Business School ( email )

Athinas Ave. & 2A Areos Str.
Vouliagmeni 166 71, Athens
Greece

Haris Harissis

Independent ( email )

No Address Available
United States

Andreas G. Merikas

University of Piraeus ( email )

Piraeus, LA
Greece

Stanley Mutenga

City University - Cass Business School ( email )

London
United Kingdom

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