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Valuing the Potential Transformation of Banks into Financial Service Conglomerates: Evidence from the Citigroup Merger
Author(s) -
Johnston Jarrod,
Madura Jeff
Publication year - 2000
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.1540-6288.2000.tb01412.x
Subject(s) - underwriting , financial services , business , finance , service (business) , bancassurance , financial system , insurance policy , marketing , general insurance , insurance law
The merger between Citicorp and Travelers Group on April 6, 1998 could have emitted two relevant signals for firms that provide financial services. The first signal is the endorsement by two prominent financial institutions that benefits from cross‐selling of bank services with insurance services, brokerage services, and other financial services can be realized. The second signal is that regulators will allow the combination of commercial banking with insurance underwriting and full‐service brokerage, paving a path for similar combinations in the future. We document a favorable share price response for commercial banks, insurance companies, and brokerage firms, which supports the argument that the merger sets a precedent for other combinations between banks and nonbank financial services that will facilitate cross‐selling and efficiencies.