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

61 Pages Posted: 9 Jun 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: April 15, 2010

Abstract

In recent years, demutualized stock exchanges have been increasingly engaging in M&A and alliance activities. To examine the effect of these growth strategies on exchange shareholders’ value creation, we focus on 14 public stock exchanges and investigate their short-run share price responses to the formation of 110 M&As and alliances all over 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 non-equity alliances. More value accrues when the integration is horizontal (cross-border) than when it is vertical (domestic). Additionally, there is evidence of learning-by-doing effects in stock exchange integration activities. Finally, we find that the better the shareholder protection, accounting standards and capital market development in the partner exchange’s country, the higher the merger and alliance premium for our sample exchange. These patterns are consistent when we examine the exchanges’ long-run performance.

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? (April 15, 2010). ECB Working Paper No. 1201. Available at SSRN: https://ssrn.com/abstract=1610150

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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