An Empirical Analysis of the Impact of Demutualization on Stock Exchange Performance: Lessons for Zimbabwe
- *Corresponding Author:
- Davis Nyangara
Department of Finance
National University of Science and Technology
E-mail: [email protected]
Received Date: January 29, 2014; Accepted Date: February 01, 2014; Published Date: February 10, 2014
Citation: Nyangara D, Musikavanhu TP (2014) An Empirical Analysis of the Impact of Demutualization on Stock Exchange Performance: Lessons for Zimbabwe. Int J Econ Manag Sci 3:161. doi:10.4172/2162-6359.1000161
Copyright: © 2014 Nyangara D, et al. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
This paper evaluates the impact of ownership structure on stock exchange performance using data from 50 stock exchanges for the period 1990 to 2011. The study adopts the Least Squares Dummy Variable (LSDV) regression model to examine the nature and significance of the relationship between stock exchange ownership structure and performance. The findings indicate that demutualized exchanges tend to perform better than mutual exchanges in terms of value of trades, market capitalization, and listings. Surprisingly, the study reveals that while combining demutualization and automation has a positive effect on market capitalization, automation is associated with reduced trading volumes and listings, ostensibly due to information efficiency effects of automation. While the general trend globally has been that automation precedes demutualization, Zimbabwe has plans to automate and demutualize its stock exchange around the same time. Given the clearly negative effect of automation on listings and volumes of trades, questions are raised regarding the efficacy of the model that Zimbabwe has adopted to boost domestic and foreign investor participation on its bourse. The study contributes immensely to the mounting evidence on demutualization, and the contemporary debate on the merits of demutualizing and automating the Zimbabwe Stock Exchange.