Does the Stock Market Compensate Banks for Diversifying into the Insurance Business?

28 Pages Posted: 25 Jan 2011

See all articles by Panagiotis Dontis-Charitos

Panagiotis Dontis-Charitos

Westminster Business School, University of Westminster

Philip Molyneux

affiliation not provided to SSRN

Sotiris K. Staikouras

City University - Cass Business School; ALBA Graduate Business School

Date Written: January 24, 2011

Abstract

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, G14, G21, G22

Suggested Citation

Dontis-Charitos, Panagiotis and Molyneux, Philip and Staikouras, Sotiris, Does the Stock Market Compensate Banks for Diversifying into the Insurance Business? (January 24, 2011). Financial Markets, Institutions & Instruments, Vol. 20, Issue 1, pp. 1-28, 2011, Available at SSRN: https://ssrn.com/abstract=1747457 or http://dx.doi.org/10.1111/j.1468-0416.2010.00164.x

Panagiotis Dontis-Charitos (Contact Author)

Westminster Business School, University of Westminster ( email )

35 Marylebone Road
London NW1 5LS
United Kingdom

Philip Molyneux

affiliation not provided to SSRN

No Address Available

Sotiris Staikouras

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

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