Financial Services Modernization Act of 1999: Market Assessment of Winners and Losers in The Insurance Industry

Massey University, Department of Commerce Working Paper No. 04.01

25 Pages Posted: 5 Jun 2017

See all articles by Abdullah Mamun

Abdullah Mamun

University of Saskatchewan - Department of Finance and Management Science

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance

Neal Maroney

University of New Orleans - College of Business Administration

Gordon V. Karels

University of Nebraska at Lincoln - Department of Finance

Date Written: June 5, 2017

Abstract

This paper investigates the impact of the Financial Services Modernization Act (FSMA) of 1999 on the insurance industry. We identify three events that have a differential impact across the business lines of the insurance industry. The overall impact of the FSMA across the business lines in the insurance industry is positive and the impact on each business line is significantly different. Firms in property/casualty insurance gain more than the rest of the firms in the insurance industry. Exposure to systematic risk is reduced after the FSMA and this can explain the cross-sectional variation of the wealth effect. In cross-sectional analysis we also find, consistent with merger literature, that larger and poorly performing firms benefit from the cross-industry merger opportunities under the FSMA.

Keywords: Insurance Industry, Wealth Effects, Financial Modernization Act, Cross-Industry Merger, Systematic Risk

Suggested Citation

Mamun, Abdullah and Hassan, M. Kabir and Maroney, Neal and Karels, Gordon V., Financial Services Modernization Act of 1999: Market Assessment of Winners and Losers in The Insurance Industry (June 5, 2017). Massey University, Department of Commerce Working Paper No. 04.01, Available at SSRN: https://ssrn.com/abstract=554441

Abdullah Mamun (Contact Author)

University of Saskatchewan - Department of Finance and Management Science ( email )

College of Commerce
Saskatoon, Saskatchewan S7N 5A7
Canada
306 966 1862 (Phone)
306 966 2515 (Fax)

HOME PAGE: http://www.commerce.usask.ca/faculty/mamun/

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

Neal Maroney

University of New Orleans - College of Business Administration ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

Gordon V. Karels

University of Nebraska at Lincoln - Department of Finance ( email )

Lincoln, NE 68588-0490
United States

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