Growth Strategies and Value Creation: What Works Best for Stock Exchanges?

51 Pages Posted: 28 Feb 2010

See all articles by Iftekhar Hasan

Iftekhar Hasan

Fordham University - Gabelli School of Business; Bank of Finland

Heiko Schmiedel

European Central Bank - Securities Settlement Systems Policy Division

Liang Song

Multiple version iconThere are 3 versions of this paper

Date Written: January 11, 2010

Abstract

In recent years, demutualized stock exchanges have increasingly engaged in M&A and alliance activities. To shed light on this topic, we investigate short-run share price responses to the formation of 110 stock exchange M&As and alliances in the period 2000–2008. Our findings show that the average stock-price responses to a stock-exchange M&A or alliance is positive. Stock exchange M&As create more value than alliances. For alliances, joint ventures generate more value than non-equity alliances. More value is created when the integration is horizontal and cross-border than when it is vertical and domestic. Evidence is also found for learning-by-doing effects in stock exchange integration activities. Finally, we find that the better the shareholder protection, accounting standards and degree of capital market development in the partnering exchange’s country, the higher the merger and alliance premium. These patterns also obtain when we examine long-run performance measures such as the three-year buy-and-hold abnormal return, change in ROA (ROE), change in liquidity, and change in market capitalization of IPO between years t-2 and t 2.

Keywords: exchanges, mergers and acquisitions, strategic alliances, joint ventures, network organization

JEL Classification: L22, G32, D23

Suggested Citation

Hasan, Iftekhar and Schmiedel, Heiko and Song, Liang, Growth Strategies and Value Creation: What Works Best for Stock Exchanges? (January 11, 2010). Bank of Finland Research Discussion Paper No. 2/2010. Available at SSRN: https://ssrn.com/abstract=1559888 or http://dx.doi.org/10.2139/ssrn.1559888

Iftekhar Hasan (Contact Author)

Fordham University - Gabelli School of Business ( email )

Rose Hill Campus Bronx
New York, NY 10458
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

Heiko Schmiedel

European Central Bank - Securities Settlement Systems Policy Division ( email )

Directorate General Payment Systems
Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany
+49-69 13 44 70 59 (Phone)
+49-69 13 44 60 00 (Fax)

No contact information is available for Liang Song

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