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International Journal of Economics & Management Sciences

.: Home > International Journal of Economics & Management Sciences > 2014 > Volume 3 Number 1 > Davis Nyangara1 * and Tariro P Musikavanhu2

An Empirical Analysis of the Impact of Demutualization on Stock Exchange Performance: Lessons for Zimbabwe

Davis Nyangara1 * and Tariro P Musikavanhu2
1Department of Finance, National University of Science and Technology, Bulawayo, Zimbabwe 2Securities Exchange Commission of Zimbabwe (SECZ), Harare, Zimbabwe
Abstract :

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.

Keywords :
Demutualization; Stock exchange

Date Deposited : 16 May 2016 20:58

Last Modified : 17 May 2016 21:42

Official URL:

Volume 3, Number 1, August 2014 , ISSN 2162-6359

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