Wealth Effects of Banks' Rights to Market and Originate Annuities

Arnold R. Cowan (), Jann C. Howell and Mark L. Power
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Jann C. Howell: Iowa State University
Mark L. Power: Iowa State University

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Abstract: We examine wealth effects, for banks and insurers, of bank rights to sell and underwrite annuities. The stock-price reactions to four court and regulatory decisions are consistent with expectations of bank gains at insurers' expense. Cross-sectionally, smaller, riskier insurers with higher distribution costs and substantial annuity business sustain larger wealth losses. Larger, riskier bank holding companies with fee- based and consumer business gain most, consistent with the extension of federal safety-net guarantees as a source of gains. Banking stock-price reactions to the Supreme Court's decision are opposite other findings, possibly reflecting unfulfilled expectations of a broader mandate for expanded bank rights.

Keywords: Annuities; VALIC; financial modernization; deregulation; deposit insurance; Blackfeet National Bank; event studies (search for similar items in EconPapers)
JEL-codes: G21 G22 G28 G14 L51 (search for similar items in EconPapers)
Date: 2002-03-06
Note: Type of Document - Acrobat 5.0 PDF; prepared on Windows 2000;
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpfi:0203002

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