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Growth Strategies and Value Creation: What Works Best for Stock Exchanges?
Author(s) -
Hasan Iftekhar,
Schmiedel Heiko,
Song Liang
Publication year - 2012
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.1540-6288.2012.00337.x
Subject(s) - shareholder , stock exchange , business , alliance , monetary economics , stock (firearms) , shareholder value , value (mathematics) , strategic alliance , value creation , industrial organization , financial economics , economics , finance , corporate governance , mechanical engineering , machine learning , political science , computer science , law , engineering
In recent years, demutualized stock exchanges increasingly have been engaging in mergers and acquisition (M&A) and alliance activities. To examine the effect of these growth strategies on exchange shareholders’ value creation, we focus on 15 public stock exchanges and investigate their short‐run share price responses to the formation of 111 M&As and alliances around the world spanning the period 2000–2008. Our findings show that the average stock price responses for M&As and alliances are positive. M&As create more value than alliances. For alliances, joint ventures generate more value than nonequity alliances. More value accrues when the integration is horizontal than when it is vertical. Cross‐border integration creates more value than domestic integration. In addition, there is evidence of learning‐by‐doing effects in stock exchange integration activities. Finally, we find that when the partnering exchange is located in a country with better shareholder protection, accounting standards, and capital market development, more shareholder value accrues to our sample exchange. These patterns are consistent when we examine the exchanges’ long‐run performance.