Cross‐Industry Product Diversification and Contagion in Risk and Return: The Case of Bank‐Insurance and Insurance‐Bank Takeovers

38 Pages Posted: 9 Aug 2016

See all articles by Elyas Elyasiani

Elyas Elyasiani

Temple University - Department of Finance

Sotiris K. Staikouras

City University - Cass Business School; ALBA Graduate Business School

Panagiotis Dontis-Charitos

Westminster Business School, University of Westminster

Date Written: September 2016

Abstract

We investigate the impact of domestic/international bancassurance deals on the risk‐return profiles of announcing and nonannouncing banks and insurers within a GARCH model. Bank‐insurance deals produce intra‐ and interindustry contagion in both risk and return, with larger deals producing greater contagion. Bidder banks and peers experience positive abnormal returns, with the effects on insurer peers being stronger than those on bank peers. Insurance‐bank deals produce insignificant excess returns for bidder and peer insurers and positive valuations for peer banks. Following the deal, the bank bidders' idiosyncratic (systematic) risk falls (increases), while insurance bidders exhibit a lower systematic risk and maintain their idiosyncratic risk.

Suggested Citation

Elyasiani, Elyas and Staikouras, Sotiris and Dontis-Charitos, Panagiotis, Cross‐Industry Product Diversification and Contagion in Risk and Return: The Case of Bank‐Insurance and Insurance‐Bank Takeovers (September 2016). Journal of Risk and Insurance, Vol. 83, Issue 3, pp. 681-718, 2016. Available at SSRN: https://ssrn.com/abstract=2820371 or http://dx.doi.org/10.1111/jori.12066

Elyas Elyasiani (Contact Author)

Temple University - Department of Finance ( email )

Fox School of Business and Management
Philadelphia, PA 19122
United States
215-204-5881 (Phone)
215-204-5698 (Fax)

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

Panagiotis Dontis-Charitos

Westminster Business School, University of Westminster ( email )

35 Marylebone Road
London NW1 5LS
United Kingdom

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