Research Discussion Papers, Bank of Finland
No 2/2010:
Growth strategies and value creation: what works best for stock exchanges?
Iftekhar Hasan ()
, Heiko Schmiedel and Liang Song
Abstract: In recent years, demutualized stock exchanges have
increasingly engaged in M&A and alliance activities. To shed light on this
topic, we investigate short-run share price responses to the formation of
110 stock exchange M&As and alliances in the period 2000–2008. Our
findings show that the average stock-price responses to a
stock-exchange M&A or alliance is positive. Stock exchange M&As create more
value than alliances. For alliances, joint ventures generate more value
than non-equity alliances. More value is created when the integration is
horizontal and cross-border than when it is vertical and domestic. Evidence
is also found for learning-by-doing effects in stock exchange integration
activities. Finally, we find that the better the shareholder protection,
accounting standards and degree of capital market development in the
partnering exchange’s country, the higher the merger and alliance premium.
These patterns also obtain when we examine long-run performance measures
such as the three-year buy-and-hold abnormal return, change in ROA (ROE),
change in liquidity, and change in market capitalization of IPO between
years t-2 and t+2.
Keywords: exchanges; mergers and acquisitions; strategic alliances; joint ventures; network organization; (follow links to similar papers)
JEL-Codes: D23; G32; L22; (follow links to similar papers)
48 pages, January 11, 2010
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