CHANGE IN DEFAULT RISK AFTER M&A: Evidence from Insurance Companies
Post by MSF Chula at Tuesday, 8 August 2017 10:35 AM

This study aims to investigate the change in default risk of insurance companies after M&A through product diversification and geographical diversification. The data consists of 739 M&A deals in eight countries e.g. USA, UK, Canada, France, Germany, Italy, Japan, and Switzerland.
The results are inconsistent with the theory of portfolio diversification and suggest that mergers involving insurance companies generally increase default risk to the acquirer, even when the merger parties offers different types of insurance products or when they operates in different geographical locations. Several plausible explanations include default risk of target firms dominating the covariance between the combined firms, agency problem, and market integration.

Last updated at Tuesday, 8 August 2017 10:35 AM