Stock exchange governance and stock liquidity: International evidence

This paper empirically investigates the effects of exchange demutualization on listed firms around the world. In particular, it examines how stock exchange demutualization affects stock liquidity and how the effect varies by exchange operating performance and country development level. We find that stock liquidity improves following exchange demutualization. Specifically, the effect is more evident among exchanges with stronger operating performance which tend to diversify their revenue, and which belong to developed countries. Furthermore, we identify an increase in the market share of exchanges in developed markets in response to exchange ownership conversion, which is mostly driven by domestic order flow. Overall, this paper highlights the importance of the exchange ownership structure strategy in enhancing financial market quality in international markets.