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Does the stock market compensate banks for diversifying into the insurance business?

Dontis-Charitos, Panagiotis and Molyneux, Philip and Staikouras, Sotiris K. (2011) Does the stock market compensate banks for diversifying into the insurance business? Financial Markets, Institutions and Instruments, 20 (1). pp. 1-28. ISSN 0963-8008

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Official URL: http://dx.doi.org/10.1111/j.1468-0416.2010.00164.x

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.

Item Type:Article
Research Community:University of Westminster > Westminster Business School
ID Code:10122
Deposited On:06 Dec 2011 10:27
Last Modified:06 Dec 2011 10:27

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