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

H. Semih Yildirim, Seung‐Woog (Austin) Kwag and M. Cary Collins

Journal of Business Finance & Accounting, 2006, vol. 33, issue 9‐10, 1629-1649

Abstract: Abstract: 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.

Date: 2006
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