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Stock exchange demutualization and performance

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  • Azzam, Islam

Abstract

Literature on the demutualization of stock exchanges has focused on social welfare and efficiency issues, whereas there is scarce empirical literature referring to the impact of a demutualization on the exchange financial performance. In addition, little is known about the factors that influence an exchange's decision to demutualize. Utilizing data on 11 out of 20 demutualized stock exchanges during the period 1996-2008, we find that: (1) demutualization increases an exchange's financial performance, size, and liquidity, while lowers its debt; (2) a stock exchange with relatively large size has relatively low profitability and high debt; (3) an exchange with relatively large size, low debt and high value of trade is more likely to demutualize. We conclude that stock exchange conversion from mutual to demutualized exchange is value enhancing for the exchange and its shareholders.

Suggested Citation

  • Azzam, Islam, 2010. "Stock exchange demutualization and performance," Global Finance Journal, Elsevier, vol. 21(2), pages 211-222.
    • Handle: RePEc:eee:glofin:v:21:y:2010:i:2:p:211-222
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    Cited by:

    1. Isaac Otchere & Sana Mohsni, 2016. "Changing organizational form in the stock exchange industry and risk-taking," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 30(4), pages 427-451, November.
    2. Manuela Geranio, 2016. "Evolution of the Exchange Industry," Springer Books, Springer, number 978-3-319-21027-8, January.
    3. Giovanna Zanotti, 2012. "Demutualization and the Globalization of Stock Markets," Chapters, in: Geoffrey Poitras (ed.), Handbook of Research on Stock Market Globalization, chapter 7, Edward Elgar Publishing.
    4. Talla M. Aldeehaani & Amani Kh. Bouresli, 2017. "Stakeholders' Perceptions and Predictions of Stock Exchange Demutualization: The Case of Kuwait Stock Exchange," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 33-41.

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