An Examination of Demutualization's Effect on Stock Market Liquidity

Abstract

This paper investigates the effect of demutualization on securities exchange liquidity utilizing yearly information accessible from 24 demutualized and 26 common stock trades for the period 1990 to 2011. We utilize a board information relapse model to look at the nature and meaning of the connection between stock trade demutualization and two proportions of securities exchange liquidity (turnover rate and the worth of volume exchanged comparative with GDP (Gross domestic product). The discoveries show that demutualized trades display fundamentally more prominent liquidity contrasted with common trades in the wake of controlling for age, size, exchanging innovation, and level of monetary turn of events. We likewise see that, around the world, the pattern has been that mechanization of exchanging goes before demutualization, and that the time among robotization and demutualization has a positive yet genuinely immaterial impact on liquidity. The review is a striking takeoff from the customary spotlight on the trade administration impacts of demutualization. Moreover, it adds to the writing on monetary market improvement by reporting a portion of the vital drivers of securities exchange liquidity, which in itself is a broadly recognized driver of financial development