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Stock Market Reactions and Information Transfer Due to Financial Instability in the Life Insurance Industry

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  • Stephen M. Avila
  • Kevin L. Eastman
  • Richard B. Corbett
  • John C. Bratton1

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.

Suggested Citation

  • Stephen M. Avila & Kevin L. Eastman & Richard B. Corbett & John C. Bratton1, 2000. "Stock Market Reactions and Information Transfer Due to Financial Instability in the Life Insurance Industry," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 3(2), pages 155-170, September.
    • Handle: RePEc:bla:rmgtin:v:3:y:2000:i:2:p:155-170
    DOI: j.1540-6296.2000.tb00028.x
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    References listed on IDEAS

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