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Browsing Finance Publications by Subject "Demutualization"
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- ItemAn Analysis of the Impact of Demutualization on Stock Market Liquidity(OMICS Publishing Group, 2014) Nyangara, Davis; Mazviona, Batsirai WinmoreThis paper analyzes the impact of demutualization on stock market liquidity using annual data available from 24 demutualized and 26 mutual stock exchanges for the period 1990 to 2011. We use a panel data regression model to examine the nature and significance of the relationship between stock exchange demutualization and two measures of stock market liquidity (turnover rate and the value of volume traded relative to Gross Domestic Product (GDP). The findings indicate that demutualized exchanges exhibit significantly greater liquidity compared to mutual exchanges after controlling for age, size, trading technology, and level of economic development. We also observe that, world-wide, the trend has been that automation of trading precedes demutualization, and that the time between automation and demutualization has a positive but statistically insignificant effect on liquidity. The study is a remarkable departure from the traditional focus on the exchange governance effects of demutualization. Furthermore, it contributes to the literature on financial market development by documenting some of the key drivers of stock market liquidity, which in itself is a widely acknowledged driver of economic growth.
- ItemAn Empirical Analysis of the Impact of Demutualization on Stock Exchange Performance: Lessons for Zimbabwe(OMICS Publishing Group, 2014) Nyangara, Davis; Musikavanhu, Tariro P.This paper evaluates the impact of ownership structure on stock exchange performance using data from 50 stock exchanges for the period 1990 to 2011. The study adopts the Least Squares Dummy Variable (LSDV) regression model to examine the nature and significance of the relationship between stock exchange ownership structure and performance. The findings indicate that demutualized exchanges tend to perform better than mutual exchanges in terms of value of trades, market capitalization, and listings. Surprisingly, the study reveals that while combining demutualization and automation has a positive effect on market capitalization, automation is associated with reduced trading volumes and listings, ostensibly due to information efficiency effects of automation. While the general trend globally has been that automation precedes demutualization, Zimbabwe has plans to automate and demutualize its stock exchange around the same time. Given the clearly negative effect of automation on listings and volumes of trades, questions are raised regarding the efficacy of the model that Zimbabwe has adopted to boost domestic and foreign investor participation on its bourse. The study contributes immensely to the mounting evidence on demutualization, and the contemporary debate on the merits of demutualizing and automating the Zimbabwe Stock Exchange.