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Growth Strategies and Value Creation: What Works Best for Stock Exchanges?

  • Iftekhar Hasan
  • Heiko Schmiedel
  • Liang Song

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 ?ndings 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://hdl.handle.net/10.1111/j.1540-6288.2012.00337.x
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Article provided by Eastern Finance Association in its journal The Financial Review.

Volume (Year): 47 (2012)
Issue (Month): 3 (08)
Pages: 469-499

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Handle: RePEc:bla:finrev:v:47:y:2012:i:3:p:469-499
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