Harilaos F. Harissis, Andreas Merikas, Stanley Mutenga and Sotiris K. Staikouras
The purpose of this paper is to investigate the interface between the banking and insurance sectors. Using capital market data, the paper aims to discover any significant equity…
Abstract
Purpose
The purpose of this paper is to investigate the interface between the banking and insurance sectors. Using capital market data, the paper aims to discover any significant equity returns around the announcement date of these bank‐insurance interfaces.
Design/methodology/approach
The analysis employs an event study methodology to evaluate the equity performance of these institutions. The empirical findings are based on well‐known financial intermediaries taken from an international sample.
Findings
The magnitude and sign of equity returns appear to differ among the cases examined. Some firms exhibit considerable abnormal returns, while others remain passive to any corporate restructuring revelation, or even undrape stock market losses. In many cases, the latter is associated with the overall economic environment, and/or with investments that are not compatible with the general banking philosophy of “fast growth within short‐term horizons.” Based on equity returns, the bank‐insurance interface seems to be the most preferable business restructuring; while insurance divestments and horizontal mergers, among financial intermediaries, do not perform as profitably as expected.
Originality/value
The paper will be of value to those interested in capital markets with emphasis on universal banking and insurance. It is suitable for academics as well as practitioners.