Demutualization and Public Offerings of Financial Exchanges

26 Pages Posted: 1 Dec 2005

See all articles by Reena Aggarwal

Reena Aggarwal

Georgetown University - Robert Emmett McDonough School of Business

Sandeep Dahiya

Georgetown University - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: November 6, 2005

Abstract

Almost all exchanges around the world were member-owned, organized as "non-profit, mutual" organizations, until the early 1990s. However, the last 10 years have seen a dramatic change in the organizational structure of exchanges as they have demutualized and evolved into "for-profit" entities usually owned by investors rather than just members. This demutualization process is frequently accompanied by a public listing of shares allowing for wide spread ownership. These are major changes for a sector that plays a critical role in the financial markets and the capital raising process. We argue that these changes are being driven by technological, regulatory and industry specific factors and should have wide ranging consequences both for the exchanges as well as market participants. We find that demutualized exchanges have performed well both in terms of returns to shareholders and operating performance. However, demutualization is a relatively recent phenomenon with limited history and therefore the results must be interpreted cautiously.

Keywords: demutualization, stock exchanges, public offering

JEL Classification: G10, G18, G20

Suggested Citation

Aggarwal, Reena and Dahiya, Sandeep, Demutualization and Public Offerings of Financial Exchanges (November 6, 2005). Available at SSRN: https://ssrn.com/abstract=859305 or http://dx.doi.org/10.2139/ssrn.859305

Reena Aggarwal (Contact Author)

Georgetown University - Robert Emmett McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-3784 (Phone)
202-687-0798 (Fax)

HOME PAGE: http://explore.georgetown.edu/people/aggarwal/

Sandeep Dahiya

Georgetown University - Department of Finance ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-3832 (Phone)

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