Do Stocks Become More Liquid When Exchanges Demutualize?

41 Pages Posted: 22 Jun 2021

Date Written: May 2021


This paper empirically investigates the effects of stock exchange demutualization on listed firms. In particular, this work examines how exchange demutualization affects stock liquidity and how the effect varies by country development level and exchange operating performance. We document the positive effect of exchange demutualization on stock liquidity, while gains in trading activity as measured by turnover are concentrated among exchanges across developed countries. The liquidity improvement in terms of transaction costs and market activity is more valuable for exchanges that exhibit higher levels of market profitability, tend to diversify their income revenue and invest in technology. Further, demutualization is associated with an increase in the market share of exchanges from developed countries, where the increase is drawn from the domestic order flow. Overall, our findings highlight the important role of exchange and country development settings in shaping the impact of demutualization on stock liquidity in international markets.

Keywords: Stock exchange; Demutualization; Stock liquidity; Operating performance

JEL Classification: G15; G34

Suggested Citation

Boussetta, Selma, Do Stocks Become More Liquid When Exchanges Demutualize? (May 2021). Available at SSRN: or

Selma Boussetta (Contact Author)

University of Bordeaux ( email )

Avenue Léon Duguit
Bordeaux, 33000

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