An Examination of the Equity Market Response to The Gramm-Leach-Bliley Act Across Commercial Banking, Investment Banking, and Insurance Firms

:  This paper examines the wealth effects of the events surrounding the passage of the Gramm‐Leach‐Bliley Act of 1999 and changes in systematic risk from the pre‐Act period to the post‐Act period for commercial banks, investment banks, and insurance firms. The results suggest that investment banks a...

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Bibliographic Details
Published in:Journal of business finance & accounting 2006-11, Vol.33 (9-10), p.1629-1649
Main Authors: Yildirim, H. Semih, Kwag, Seung-Woog (Austin), Collins, M. Cary
Format: Article
Language:English
Subjects:
Accounting
Banking
Business studies
Commercial banks
Corporate finance
deregulation
Equity
Exploitation
Financial analysis
Financial Services Modernization Act 1999-US
Gramm-Leach-Bliley Act
Insurance
Insurance companies
Investment
Investment banking
Market
Production diversification
Risk management
risk shift
Studies
wealth effects
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Summary::  This paper examines the wealth effects of the events surrounding the passage of the Gramm‐Leach‐Bliley Act of 1999 and changes in systematic risk from the pre‐Act period to the post‐Act period for commercial banks, investment banks, and insurance firms. The results suggest that investment banks and insurance firms are better positioned to exploit the benefits of product‐line diversification opportunities allowed by the legislation compared to commercial banks that experience no significant market reaction. Further evidence indicates a significant risk shift and overall reduction in riskiness for the financial sectors under consideration around the event period.
ISSN:0306-686X
1468-5957
DOI:10.1111/j.1468-5957.2006.00642.x