An Examination of the Equity Market Response to The Gramm-Leach-Bliley Act Across Commercial Banking, Investment Banking, and Insurance Firms

This paper examines the wealth effects of the events surrounding the passage of the Gramm-Leach-Bliley Act of 1999 and changes in systematic risk from the pre-Act period to the post-Act period for commercial banks, investment banks, and insurance firms. The results suggest that investment banks and insurance firms are better positioned to exploit the benefits of product-line diversification opportunities allowed by the legislation compared to commercial banks that experience no significant market reaction. Further evidence indicates a significant risk shift and overall reduction in riskiness for the financial sectors under consideration around the event period. Copyright 2006 The Authors Journal compilation (c) 2006 Blackwell Publishing Ltd.