Stock Market Reactions and Information Transfer Due to Financial Instability in the Life Insurance Industry |
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| Authors: | Stephen M Avila Kevin L Eastman Richard B Corbett John C Bratton |
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| Institution: | Associate professor of insurance and co-director, Center of Actuarial Science, Insurance, and Risk Management, Ball State University, Muncie, Ind.;Associate professor, Robert L. Atkins Memorial Professorship in RMI at Florida State University;Business Administration, Department of Economics and Finance, Seattle University;State Farm Professor of Insurance, University of Louisiana-Monroe |
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| Abstract: | ABSTRACT: This study examines the stock market reactions and information transfer effects due to financial instability for four life insurance companies that eventually failed or were taken over by regulators. The four companies were First Executive Corporation, First Capital Holdings Corporation, Monarch Capital Corporation, and Mutual Benefit Life Insurance Company. In general, significant negative capital market responses were found after a company released an announcement regarding financial instability. Information transfer effects of a negative announcement by one insurer were not found to have a significant impact on the other insurers. This study complements past studies of contagion effects within the insurance industry. |
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