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The Intra-Industry Effects of Life Insurance Company Demutualizaton

Author

Listed:
  • Joseph W. Meador

    (Finance Group, 413 Hayden Hall Boston, College of Business Administration, Northeastern University, MA 02115, USA)

  • Emery A. Trahan

    (Finance Group, 413 Hayden Hall Boston, College of Business Administration, Northeastern University, MA 02115, USA
    We thank participants at the Eastern Finance Association annual meeting, the Academy of Financial Services annual meeting, and an anonymous referee for helpful comments and suggestions. Emery Trahan acknowledges support from the Donald F. Harding Professorship.)

Abstract

We examine the impact of demutualization announcements by 13 life insurance companies during 1996-2000 on the value of existing stock-owned life insurance companies and companies in other segments of the insurance industry. Demutualization announcements are associated with negative stock price reactions in the days around the announcement, and with larger and positive stock price reactions in the days following announcement. Overall, the results support the contention that life insurance company demutualizations signal favorable future industry conditions and/or increased likelihood of future acquisitions for all segments of the insurance industry. Active-minded investors may use these results to develop alpha-generating investment strategies.

Suggested Citation

  • Joseph W. Meador & Emery A. Trahan, 2008. "The Intra-Industry Effects of Life Insurance Company Demutualizaton," JRFM, MDPI, vol. 1(1), pages 1-23, December.
    • Handle: RePEc:gam:jjrfmx:v:1:y:2008:i:1:p:77-99:d:28295
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    References listed on IDEAS

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