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Mutual to Stock Conversion, Information Cost, and Thrift Performance
Author(s) -
Carhill Mike,
Hasan Iftekhar
Publication year - 1997
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.1997.tb00438.x
Subject(s) - stock (firearms) , ex ante , economics , business , monetary economics , financial economics , finance , macroeconomics , mechanical engineering , engineering
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 .