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

31 Pages Posted: 7 Jul 2012

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

affiliation not provided to SSRN

Multiple version iconThere are 3 versions of this paper

Date Written: August 2012

Abstract

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.

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? (August 2012). Financial Review, Vol. 47, Issue 3, pp. 469-499, 2012. Available at SSRN: https://ssrn.com/abstract=2101923 or http://dx.doi.org/10.1111/j.1540-6288.2012.00337.x

Iftekhar Hasan

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)

Liang Song

affiliation not provided to SSRN

Register to save articles to
your library

Register

Paper statistics

Downloads
1
Abstract Views
546
PlumX Metrics