The impact of demutualization on stock exchanges’ financial performance: the moderating role of corporate governance practices

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The conversion to for-profit structures, i.e. demutualization strategy, has been adopted by a large number of firms in order to face competition. The literature focuses generally on testing the impact of demutualization on firm financial performance, however, little interest has been addressed to corporate governance restructuring. In this paper, we analyze the changes in the composition of the board of directors of a sample of 14 demutualized stock exchanges to better understand the workings behind their successful conversion to for-profit firms. We find that, following demutualization, exchanges decreased their board size and appointed more directors politically connected, directors with diversified professional experience and directors with regulatory and international experience. We also document that this corporate governance restructuring contributed to improve exchange reputation.

Author(s):

Faten Ben Slimane    
Université Paris Est Marne la Vallée
France

Laura Padilla Angulo    
Loyola University Andalucía
Spain