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What Effect Did AIG's Bailout, and the Preceding Events, Have on Its Competitors?
Author(s) -
Egginton Jared F.,
Hilliard James I.,
Liebenberg Andre P.,
Liebenberg Ivonne A.
Publication year - 2010
Publication title -
risk management and insurance review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.386
H-Index - 16
eISSN - 1540-6296
pISSN - 1098-1616
DOI - 10.1111/j.1540-6296.2010.01185.x
Subject(s) - bailout , competitor analysis , monetary economics , economics , event study , multivariate statistics , business , financial crisis , macroeconomics , statistics , paleontology , context (archaeology) , management , mathematics , biology
We examine the effect of American International Group's (AIG) bailout, and the events leading up to it, on its insurance industry rivals. The reaction of rivals to AIG‐related events depends on the relative strength of two competing effects. The contagion effect implies that rival returns will decrease following negative events affecting AIG. In contrast, competitive effects will occur if investors expect that rivals will be able to benefit from AIG's downfall. Using three‐factor multivariate regression model event study methodology, we find evidence of both effects around several key dates in AIG's decline.