What Effect Did AIG's Bailout, and the Preceding Events, Have on Its Competitors?

Risk Management and Insurance Review, Forthcoming.

36 Pages Posted: 5 Apr 2009 Last revised: 28 Apr 2010

See all articles by Jared F. Egginton

Jared F. Egginton

Boise State University - College of Business & Economics

James I. Hilliard

Temple University - Department of Risk, Insurance & Healthcare Management

Andre P. Liebenberg

University of Mississippi - School of Business Administration

Ivonne A. Liebenberg

Multiple version iconThere are 2 versions of this paper

Date Written: April 3, 2010

Abstract

We examine the effect of AIG’s bailout, and the events leading up to it, on its insurance industry rivals. The reaction of rivals to AIG-related events depends on the relative strength of two competing effects. The contagion effect implies that rival returns will decrease following negative events affecting AIG. In contrast, competitive effects will occur if investors expect that rivals will be able to benefit from AIG’s downfall. Using a three-factor multivariate regression model event study methodology we find evidence of both effects around several key dates in AIG’s decline.

Keywords: American International Group (AIG), Competitive Effects, Contagion Effects.

Suggested Citation

Egginton, Jared Frank and Hilliard, James I. and Liebenberg, Andre P. and Liebenberg, Ivonne A., What Effect Did AIG's Bailout, and the Preceding Events, Have on Its Competitors? (April 3, 2010). Risk Management and Insurance Review, Forthcoming., Available at SSRN: https://ssrn.com/abstract=1373225 or http://dx.doi.org/10.2139/ssrn.1373225

Jared Frank Egginton

Boise State University - College of Business & Economics ( email )

United States
2084264586 (Phone)

James I. Hilliard

Temple University - Department of Risk, Insurance & Healthcare Management ( email )

1801 Liacouras Walk
Philadelphia, PA 19122
United States

Andre P. Liebenberg (Contact Author)

University of Mississippi - School of Business Administration ( email )

PO Box 3986
Oxford, MS 38677
United States

No contact information is available for Ivonne A. Liebenberg

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