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What Effect Did AIG's Bailout, and the Preceding Events, Have on Its Competitors?

Authors

  • Jared F. Egginton,

    1. Jared F. Egginton is at the College of Business Administration, University of Mississippi; e-mail: jegginton@bus.olemiss.edu. James I. Hilliard is at the Terry College of Business, University of Georgia; e-mail: jih@uga.edu. Andre P. Liebenberg is at the College of Business Administration, University of Mississippi, MS 38677; phone: 662-915-3844; fax: 662-915-7968; e-mail: aliebenberg@bus.olemiss.edu. Ivonne A. Liebenberg is at the College of Business Administration, University of Mississippi; e-mail: iliebenberg@bus.olemiss.edu. This article was subject to double-blind peer review. We thank Larry Cox, Kathleen Fuller, Rob Hoyt, Bonnie Van Ness, and seminar participants at the University of Mississippi and the 2009 Southern Risk and Insurance Annual Meeting for helpful comments and suggestions.
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  • James I. Hilliard,

    1. Jared F. Egginton is at the College of Business Administration, University of Mississippi; e-mail: jegginton@bus.olemiss.edu. James I. Hilliard is at the Terry College of Business, University of Georgia; e-mail: jih@uga.edu. Andre P. Liebenberg is at the College of Business Administration, University of Mississippi, MS 38677; phone: 662-915-3844; fax: 662-915-7968; e-mail: aliebenberg@bus.olemiss.edu. Ivonne A. Liebenberg is at the College of Business Administration, University of Mississippi; e-mail: iliebenberg@bus.olemiss.edu. This article was subject to double-blind peer review. We thank Larry Cox, Kathleen Fuller, Rob Hoyt, Bonnie Van Ness, and seminar participants at the University of Mississippi and the 2009 Southern Risk and Insurance Annual Meeting for helpful comments and suggestions.
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  • Andre P. Liebenberg,

    1. Jared F. Egginton is at the College of Business Administration, University of Mississippi; e-mail: jegginton@bus.olemiss.edu. James I. Hilliard is at the Terry College of Business, University of Georgia; e-mail: jih@uga.edu. Andre P. Liebenberg is at the College of Business Administration, University of Mississippi, MS 38677; phone: 662-915-3844; fax: 662-915-7968; e-mail: aliebenberg@bus.olemiss.edu. Ivonne A. Liebenberg is at the College of Business Administration, University of Mississippi; e-mail: iliebenberg@bus.olemiss.edu. This article was subject to double-blind peer review. We thank Larry Cox, Kathleen Fuller, Rob Hoyt, Bonnie Van Ness, and seminar participants at the University of Mississippi and the 2009 Southern Risk and Insurance Annual Meeting for helpful comments and suggestions.
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  • Ivonne A. Liebenberg

    1. Jared F. Egginton is at the College of Business Administration, University of Mississippi; e-mail: jegginton@bus.olemiss.edu. James I. Hilliard is at the Terry College of Business, University of Georgia; e-mail: jih@uga.edu. Andre P. Liebenberg is at the College of Business Administration, University of Mississippi, MS 38677; phone: 662-915-3844; fax: 662-915-7968; e-mail: aliebenberg@bus.olemiss.edu. Ivonne A. Liebenberg is at the College of Business Administration, University of Mississippi; e-mail: iliebenberg@bus.olemiss.edu. This article was subject to double-blind peer review. We thank Larry Cox, Kathleen Fuller, Rob Hoyt, Bonnie Van Ness, and seminar participants at the University of Mississippi and the 2009 Southern Risk and Insurance Annual Meeting for helpful comments and suggestions.
    Search for more papers by this author

Abstract

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.

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