Does the Stock Market Compensate Banks for Diversifying into the Insurance Business?
Financial Markets, Institutions and Instruments, Forthcoming 2010.
Posted: 10 Nov 2008 Last revised: 8 Oct 2010
Date Written: October 1, 2010
This paper explores a wide range of corporate restructurings, all available deals from wire services, in the banking and insurance sectors that led to bancassurance ventures. An event study methodology is employed to calculate excess returns on and around the deals’ announcement date. Using both univariate and multivariate analysis the paper finds bank driven mergers, deal’s size and regional categorization all triggering positive and significant market reactions. Unlike the univariate framework, multivariate analysis shows that geographic focus and language are not significant factors. The results also indicate that markets are indifferent with respect to bank withdrawals from the bank-insurance operations. Finally, Canadian, U.S. and European bank-insurance deals produce positive results, while Australasian bidders offer statistically insignificant equity returns.
Keywords: Bank-insurance interface, Divestments, Financial conglomerates, Event study, Abnormal equity returns
JEL Classification: G14, G21, G22
Suggested Citation: Suggested Citation