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Growth strategies and value creation: what works best for stock exchanges?

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Author Info

  • Hasan, Iftekhar

    ()
    (Rensselaer Polytechnic Institute, USA and Bank of Finland)

  • Schmiedel, Heiko

    (European Central Bank)

  • Song, Liang

    (Lally School of Management and Technology of Rensselaer Polytechnic Institute, USA.)

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.

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File URL: http://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/1002netti.pdf
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Bibliographic Info

Paper provided by Bank of Finland in its series Research Discussion Papers with number 2/2010.

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Length: 48 pages
Date of creation: 11 Jan 2010
Date of revision:
Handle: RePEc:hhs:bofrdp:2010_002

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Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.suomenpankki.fi/en/
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Keywords: exchanges; mergers and acquisitions; strategic alliances; joint ventures; network organization;

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  1. Gomes-Casseres, Benjamin & Hagedoorn, John & Jaffe, Adam B., 2006. "Do alliances promote knowledge flows?," Journal of Financial Economics, Elsevier, vol. 80(1), pages 5-33, April.
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