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Can Commercialization Improve the Performance of Stock Exchanges Even without Corporatization?
Author(s) -
Oldford Erin,
Otchere Isaac
Publication year - 2011
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.2010.00290.x
Subject(s) - corporatization , profitability index , business , commercialization , corporate governance , exploit , valuation (finance) , industrial organization , stock exchange , economic rent , monopoly , robustness (evolution) , capitalization , finance , economics , microeconomics , market economy , computer science , marketing , biochemistry , chemistry , linguistics , computer security , philosophy , gene
We examine the performance of mutual, demutualized, and publicly listed exchanges and find evidence of improved performance along the exchange governance continuum, with publicly traded exchanges exhibiting better operating performance than demutualized exchanges. However, our robustness test, focusing on the corporatized exchanges that have gone through the three phases of the governance structure, shows that the listed exchanges do not exhibit evidence of incremental gains in efficiency and profitability beyond what they achieved at the demutualization phase. We conclude that commercialization provides sufficient freedom for exchanges to exploit monopoly rents before going public, while corporatization brings about proper valuation of the exchanges’ franchise.