Demutualization and stock market efficiency a

IOSCO defines demutualization as the transformation of an exchange into a for-profit shareholder-owned company. The pace of exchange demutualization in developed market jurisdictions has been quite rapid.

Demutualization and stock market efficiency a

The offices of Bursa MalaysiaMalaysia's national stock exchange known before demutualization as Kuala Lumpur Stock Exchange Stock exchanges have multiple roles in the economy.

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This may include the following: Most of these available options might be achieved, directly or indirectly, through a stock exchange.

Going public[ edit ] Capital intensive companies, particularly high tech companies, always need to raise high volumes of capital in their early stages. For this reason, the public market provided by the stock exchanges has been one of the most important funding sources for many capital intensive startups.

This is quite different from the situation of the s to earlys period, when a number of companies particularly Internet boom and biotechnology companies went public in the most prominent stock exchanges around the world, in the total absence of sales, earnings and any well-documented promising outcome.

Anyway, every year a number of companies, including unknown highly speculative and financially unpredictable hi-tech startups, are listed for the first time in all the major stock exchanges — there are even specialized entry markets for these kind of companies or stock indexes tracking their performance examples include the AlternextCAC SmallSDAXTecDAXor most of the third market good companies.

In order for a partnership to be of interest to investors today, the cash on cash return must be high enough to entice investors.

Venture capital[ edit ] A third usual source of capital for startup companies has been venture capital.

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Corporate partners[ edit ] A fourth alternative source of cash for a private company is a corporate partnerusually an established multinational company, which provides capital for the smaller company in return for marketing rights, patent rights, or equity.

Corporate partnerships have been used successfully in a large number of cases. Mobilizing savings for investment[ edit ] When people draw their savings and invest in shares through an IPO or the issuance of new company shares of an already listed companyit usually leads to rational allocation of resources because funds, which could have been consumed, or kept in idle deposits with banks, are mobilized and redirected to help companies' management boards finance their organizations.

This may promote business activity with benefits for several economic sectors such as agriculture, commerce and industry, resulting in stronger economic growth and higher productivity levels of firms.

Demutualization and stock market efficiency a

Facilitating company growth[ edit ] Companies view acquisitions as an opportunity to expand product linesincrease distribution channels, hedge against volatility, increase their market shareor acquire other necessary business assets.

A takeover bid or a merger agreement through the stock market is one of the simplest and most common ways for a company to grow by acquisition or fusion. Profit sharing[ edit ] Both casual and professional stock investorsas large as institutional investors or as small as an ordinary middle-class familythrough dividends and stock price increases that may result in capital gainsshare in the wealth of profitable businesses.

Unprofitable and troubled businesses may result in capital losses for shareholders.

Be Our Partner Ghana Securities and Capital Market is an opportunity for investors, analysts and officers to understand the upcoming change in the Capital Market. Further, the categorisation of the membership structure has enabled all market actors to participate in GCX activities through any category as part of the all-inclusiveness policy of the Exchange.
NASS Endorses NSE Demutualisation Bill — Leadership Newspaper The Commission may exempt other transactions, if it finds that the requirements of registration under this Code is not necessary in the public interest or for the protection of the investors such as by reason of the small amount involved or the limited character of the public offering. The Commission shall promulgate rules and regulations involving commodity futures contracts to protect investors to ensure the development of a fair and transparent commodities market.

Corporate governance[ edit ] By having a wide and varied scope of owners, companies generally tend to improve management standards and efficiency to satisfy the demands of these shareholders and the more stringent rules for public corporations imposed by public stock exchanges and the government.

Consequently, it is alleged that public companies companies that are owned by shareholders who are members of the general public and trade shares on public exchanges tend to have better management records than privately held companies those companies where shares are not publicly traded, often owned by the company founders, their families and heirs, or otherwise by a small group of investors.

Despite this claim, some well-documented cases are known where it is alleged that there has been considerable slippage in corporate governance on the part of some public companies.

The dot-com bubble in the late s, and the subprime mortgage crisis in —08, are classical examples of corporate mismanagement. To assist in corporate governance many banks and companies worldwide utilize securities identification numbers ISIN to identify, uniquely, their stocks, bonds and other securities.

However, when poor financial, ethical or managerial records are known by the stock investorsthe stock and the company tend to lose value.

In the stock exchanges, shareholders of underperforming firms are often penalized by significant share price decline, and they tend as well to dismiss incompetent management teams. Creating investment opportunities for small investors[ edit ] As opposed to other businesses that require huge capital outlay, investing in shares is open to both the large and small stock investors because a person buys the number of shares they can afford.

Therefore, the Stock Exchange provides the opportunity for small investors to own shares of the same companies as large investors. Government capital-raising for development projects[ edit ] Governments at various levels may decide to borrow money to finance infrastructure projects such as sewage and water treatment works or housing estates by selling another category of securities known as bonds.

These bonds can be raised through the stock exchange whereby members of the public buy them, thus loaning money to the government. The issuance of such bonds can obviate, in the short term, direct taxation of citizens to finance development—though by securing such bonds with the full faith and credit of the government instead of with collateral, the government must eventually tax citizens or otherwise raise additional funds to make any regular coupon payments and refund the principal when the bonds mature.

Barometer of the economy[ edit ] At the stock exchange, share prices rise and fall depending, largely, on economic forces. Share prices tend to rise or remain stable when companies and the economy in general show signs of stability and growth.

An economic recessiondepression, or financial crisis could eventually lead to a stock market crash.Ownership is somewhat open (WFE Survey, ). IOSCO () defines demutualization as the transformation of an exchange into a for-profit.

the impact of demutualization upon stock exchange performance in terms of the returns enjoyed by shareholders in demutualized bourses vis a vis that of mutual bourses. The the effects of demutualization on market efficiency. Their research examined the number of firms listed, overall transactions, domestic market capitalization, increased.

SEC. 2. Declaration of State Policy.. – The State shall establish a socially conscious, free market that regulates itself, encourage the widest participation of ownership in enterprises, enhance the democratization of wealth, promote the development of the capital market, protect investors, ensure full and fair disclosure about securities, minimize if not totally eliminate insider trading.

SECTION Short title. This chapter may be cited as the Uniform Unclaimed Property Act (). HISTORY: Act No. , Part II, Section 34A. A stock exchange, securities exchange or bourse, is a facility where stock brokers and traders can buy and sell securities, such as shares of stock and bonds and other financial instruments.

Stock exchanges may also provide for facilities the issue and redemption of such securities and instruments and capital events including the payment of income and dividends. Public Policy Objectives of Stock Market Regulation 91 Why Should Demutualization Require a Reassessment Demutualization of Stock Exchanges—Problems, Solutions and Case Studies x PART III: STRUCTURE OF MUTUAL EXCHANGES Demutualization of a stock exchange is entire process by .

Stock exchange demutualization and performance - ScienceDirect