An Empirical Analysis of the Impact of Demutualization on Stock Exchange Performance: Lessons for Zimbabwe
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Date
2014
Journal Title
Journal ISSN
Volume Title
Publisher
OMICS Publishing Group
Abstract
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.
Description
An Empirical Analysis of the Impact of Demutualization on Stock Exchange Performance: Lessons for Zimbabwe
Keywords
Stock exchange, Demutualization
Citation
Nyangara, D. Musikavanhu, T. P. 2014. An Empirical Analysis of the Impact of Demutualization on Stock Exchange Performance: Lessons for Zimbabwe. International Journal of Economics and Management Sciences 2014, 3:1