Stock exchange demutualization and performance

Literature on the demutualization of stock exchanges has focused on social welfare and efficiency issues, whereas there is scarce empirical literature referring to the impact of a demutualization on the exchange financial performance. In addition, little is known about the factors that influence an exchange's decision to demutualize. Utilizing data on 11 out of 20 demutualized stock exchanges during the period 1996-2008, we find that: (1) demutualization increases an exchange's financial performance, size, and liquidity, while lowers its debt; (2) a stock exchange with relatively large size has relatively low profitability and high debt; (3) an exchange with relatively large size, low debt and high value of trade is more likely to demutualize. We conclude that stock exchange conversion from mutual to demutualized exchange is value enhancing for the exchange and its shareholders.