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Mutual to Stock Conversion, Information Cost, and Thrift Performance

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  • Carhill, Mike
  • Hasan, Iftekhar

Abstract

In the 1980s, a large number of thrifts converted from the mutual to the stock form of ownership. The literature has noted that investors in those conversions earned abnormally high short-term returns. However, over the long run the converters earned very poor returns. The major reason for the poor returns was the extra noninterest operational costs associated with the stock form of ownership. Since those extra operational costs were predictable, the stock offerings may have been overpriced, ex ante as well as ex post. Copyright 1997 by MIT Press.

Suggested Citation

  • Carhill, Mike & Hasan, Iftekhar, 1997. "Mutual to Stock Conversion, Information Cost, and Thrift Performance," The Financial Review, Eastern Finance Association, vol. 32(3), pages 545-568, August.
    • Handle: RePEc:bla:finrev:v:32:y:1997:i:3:p:545-68
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    Cited by:

    1. Bill Francis & Iftekhar Hasan & Dona Siregar, 2009. "The choice of IPO versus M&A: evidence from banking industry," Applied Financial Economics, Taylor & Francis Journals, vol. 19(24), pages 1987-2007.
    2. Radha K. Shiwakoti & Kevin Keasey & Robert Hudson, 2008. "Comparative performance of UK mutual building societies and stock retail banks: further evidence," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 48(2), pages 319-336, June.
    3. 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.
    4. Shiwakoti, Radha K. & Iqbal, Abdullah & Funnell, Warwick, 2018. "Organizational form, business strategies and the demise of demutualized building societies in the UK," Journal of Banking & Finance, Elsevier, vol. 94(C), pages 337-350.

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