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The Market's Assessment of the Financial Services Modernization Act of 1999

Author

Listed:
  • Akhigbe, Aigbe
  • Whyte, Ann Marie

Abstract

We examine the impact of the events leading up to and including the passage of the Financial Services Modernization Act (FSMA) of 1999 on the stock returns of banks, brokerage firms, and insurance companies. We find that the impact is positive for all institutions. Bank gains are positively related to size and capitalization. Brokerage firms gain regardless of size, but the gains are inversely related to capitalization and insurance companies gain regardless of size or capital position. The strong positive reaction suggests that the market expects the institutions to benefit from the new opportunities created by the FSMA's passage. Copyright 2001 by MIT Press.

Suggested Citation

  • Akhigbe, Aigbe & Whyte, Ann Marie, 2001. "The Market's Assessment of the Financial Services Modernization Act of 1999," The Financial Review, Eastern Finance Association, vol. 36(4), pages 119-138, November.
  • Handle: RePEc:bla:finrev:v:36:y:2001:i:4:p:119-38
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    Citations

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    Cited by:

    1. Aigbe Akhigbe & Melissa B. Frye & Ann Marie Whyte, 2005. "Financial Modernization in US Banking Markets: A Local or Global Event?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 32(7-8), pages 1561-1585.
    2. Filson, Darren & Olfati, Saman, 2014. "The impacts of Gramm–Leach–Bliley bank diversification on value and risk," Journal of Banking & Finance, Elsevier, vol. 41(C), pages 209-221.
    3. Mu-Sheng Chang & Elyas Elyasiani, 2015. "Do insurance activities enhance the performance of financial services holding companies?," Applied Economics, Taylor & Francis Journals, vol. 47(33), pages 3559-3576, July.
    4. M. Kabir Hassan & Abdullah Mamun, 2009. "Global Impact of the Gramm-Leach-Bliley Act: Evidence from Insurance Industries of Developed Countries," NFI Working Papers 2009-WP-13, Indiana State University, Scott College of Business, Networks Financial Institute.
    5. Abdullah Mamun & M. Kabir Hassan & Neal Maroney, 2005. "The Wealth and Risk Effects of the Gramm-Leach-Bliley Act (GLBA) on the US Banking Industry," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 32(1-2), pages 351-388.
    6. Atul Gupta & Lalatendu Misra, 2007. "Deal size, bid prremium, and gains in bank mergers: The impact of managerial motivations," Working Papers 0018, College of Business, University of Texas at San Antonio.
    7. Ghosh, Chinmoy & Petrova, Milena, 2013. "Does deregulation induce competition in the market for corporate control? The special case of banking," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5220-5235.
    8. repec:eee:jebusi:v:98:y:2018:i:c:p:19-31 is not listed on IDEAS
    9. Yeager, Timothy J. & Yeager, Fred C. & Harshman, Ellen, 2007. "The Financial Services Modernization Act: Evolution or Revolution?," Journal of Economics and Business, Elsevier, vol. 59(4), pages 313-339.
    10. repec:eee:mulfin:v:47-48:y:2018:i::p:91-109 is not listed on IDEAS
    11. Atul Gupta & Bently Lalatendu Misra, 2007. "Deal size, bid premium, and gains in bank mergers: The impact of managerial motivations," Working Papers 0004, College of Business, University of Texas at San Antonio.
    12. Valentina Salotti & Natalya A. Schenck & John H. Thornton Jr., 2016. "The Impact Of Real Estate Lending On Thrifts' Franchise Values During The 2007–2009 Crisis: A Comparison With Commercial Banks," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 39(1), pages 35-62, March.
    13. Neale, Faith R. & Peterson, Pamela P., 2005. "The effect of the Gramm-Leach-Bliley Act on the insurance industry," Journal of Economics and Business, Elsevier, vol. 57(4), pages 317-338.

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