What Effect Did Aig's Bailout, and the Preceding Events, Have on its Competitors?

25 Pages Posted: 9 Apr 2012

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

University of Mississippi - School of Business Administration

Multiple version iconThere are 2 versions of this paper

Date Written: Fall 2010

Abstract

We examine the effect of American International Group's (AIG) 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 three‐factor multivariate regression model event study methodology, we find evidence of both effects around several key dates in AIG's decline.

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? (Fall 2010). Risk Management and Insurance Review, Vol. 13, Issue 2, pp. 225-249, 2010, Available at SSRN: https://ssrn.com/abstract=2036904 or http://dx.doi.org/10.1111/j.1540-6296.2010.01185.x

Jared Frank Egginton (Contact Author)

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

University of Mississippi - School of Business Administration ( email )

PO Box 3986
Oxford, MS 38677
United States

Ivonne A. Liebenberg

University of Mississippi - School of Business Administration ( email )

253 Holman
Oxford, MS 38677
United States

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