Citicorp-Travelers Group merger: Challenging barriers between banking and insurance

The Citicorp-Travelers Group merger increased the prospects for new legisla tion to remove the barriers between banking and insurance, resulting in a p ositive wealth effect for institutions most likely to gain from deregulatio n. Analysis of abnormal returns surrounding the merger show that life insur ance companies and large banks (excluding Citicorp and Travelers Group) hav e significant stock price increases, while the returns of small banks, heal th insurers, and property/casualty insurers are insignificantly different f rom 0. This analysis provides evidence that investors expect large banks an d insurance companies to receive significant benefits from recent congressi onal legislation removing barriers to bancassurance. (C) 2001 Elsevier Scie nce B.V. All rights reserved.