Wealth Effects of Banks' Rights to Market and Originate Annuities

Posted: 5 Nov 2001 Last revised: 18 Mar 2016

See all articles by Arnold R. Cowan

Arnold R. Cowan

Iowa State University

Jann C. Howell

Iowa State University - Department of Accounting and Finance

Mark L. Power

Iowa State University - Department of Accounting and Finance

Date Written: 2002

Abstract

We examine wealth effects, for banks and insurers, of bank rights to sell and underwrite annuities. The stock-price reactions to four court and regulatory decisions are consistent with expectations of bank gains at insurers' expense. Cross-sectionally, smaller, riskier insurers with higher distribution costs and substantial annuity business sustain larger wealth losses. Larger, riskier bank holding companies with fee-based and consumer business gain most, consistent with the extension of federal safety-net guarantees as a source of gains. Banking stock-price reactions to the Supreme Court's decision are opposite other findings, possibly reflecting unfulfilled expectations of a broader mandate for expanded bank rights.

Keywords: Annuities, VALIC, financial modernization, deregulation, deposit insurance, Blackfeet National Bank, event studies

JEL Classification: G21, G22, G28, G14, L51

Suggested Citation

Cowan, Arnold R. and Howell, Jann C. and Power, Mark L., Wealth Effects of Banks' Rights to Market and Originate Annuities (2002). Quarterly Review of Economics and Finance, 2002, Available at SSRN: https://ssrn.com/abstract=289496

Arnold R. Cowan (Contact Author)

Iowa State University ( email )

College of Business
3344 Gerdin Business Building
Ames, IA 50011-1350
United States

HOME PAGE: http://www.bus.iastate.edu/arnie

Jann C. Howell

Iowa State University - Department of Accounting and Finance ( email )

Carver Hall
Ames, IA 50011-2063
United States

Mark L. Power

Iowa State University - Department of Accounting and Finance ( email )

Carver Hall
Ames, IA 50011-2063
United States

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