Are Super Stock Exchange Mergers Motivated by Efficiency or Market Power Gains?

40 Pages Posted: 15 Sep 2020

See all articles by Isaac K. Otchere

Isaac K. Otchere

Carleton University - Sprott School of Business

Kobana Abukari

Laurentian University

Date Written: February 3, 2020

Abstract

Stock exchange mergers can lead to increased efficiency; however, increasing levels of concentration can potentially lead to the exercise of market power. We investigate the market power repercussions of stock exchange mergers and find that the industry’s concentration levels have not significantly increased and the concentration levels do not influence exchanges’ profitability in the post-merger period. The profitability of the merging exchanges in the post-merger period is largely influenced by efficiencies in revenue generation and cost management. The absence of evidence that stock exchange mergers lead to the exercise of market power suggests that there does not appear to be an immediate need for regulatory agencies to be overly concerned about mergers among stock exchanges leading to the exploitation of market power to the detriment of consumer welfare.

Keywords: stock exchange mergers; market power; profitability

JEL Classification: G15, G34

Suggested Citation

Otchere, Isaac K. and Abukari, Kobana, Are Super Stock Exchange Mergers Motivated by Efficiency or Market Power Gains? (February 3, 2020). Journal of International Financial Markets, Institutions and Money, Vol. 64, 2020, Available at SSRN: https://ssrn.com/abstract=3665841 or http://dx.doi.org/10.2139/ssrn.3665841

Isaac K. Otchere (Contact Author)

Carleton University - Sprott School of Business ( email )

1125 Colonel By Drive
Ottawa, Ontario K1S SB6
Canada
(613) 520-2600 ext 2731 (Phone)
(613) 520-4427 (Fax)

Kobana Abukari

Laurentian University ( email )

935 Ramsey Lake Road
Sudbury P3E 2C6, Ontario P3E 2C6
Canada

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