Handbook of Research on Stock Market Globalization
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Handbook of Research on Stock Market Globalization

Edited by Geoffrey Poitras

The stock market globalization process has produced historic changes in the structure of stock markets, the effects of which are evident throughout the world. Despite these transformations, there are relatively few sources examining the connections between the globalization process currently under way and previous periods of stock market globalization. This seminal volume fills that gap.
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Chapter 8: How Stock Exchange Mergers and Acquisitions Affect Competitors’ Shareholder Value: Global Evidence

Iftekhar Hasan, Heiko Schmiedel and Liang Song


Iftekhar Hasan, Heiko Schmiedel and Liang Song INTRODUCTION Stock exchange mergers and acquisitions (M&As) have recently become a growing trend due to capital market globalization, the innovation of technology and stock exchange demutualization (Hasan et al. 2003; Knowledge@Wharton 2006). For instance, the NYSE Group and Euronext merged and became the first transatlantic equities market, NYSE Euronext. Furthermore, NYSE’s competitor, NASDAQ, recently bought the Nordic stock exchange operator OMX. Global exchange integrations such as these may create more competition and increase the efficiency of capital flows (US Securities and Exchange Commission 2007). The existing literature has investigated the effects of stock exchange M&As from several dimensions including stock liquidity (Nielsson 2009; Hasan et al. 2010; Francis et al. 2010; Hasan and Schmiedel 2004). However, many parties, including investors, firms and financial intermediaries, and the overall economy, are involved and affected by such an analysis (Nielsson 2009). Therefore, the existing literature concerning the effects of stock exchange M&As is selective and incomplete in its coverage. In this chapter, we examine how stock exchange M&As affect their competitors’ shareholder value in order to provide additional insight into the influence of stock exchange M&As. Specifically, we focus on 63 stock exchanges involved in 63 M&As between 2000 and 2007 and investigate their public competitors’ short-run share price responses. We define that two stock exchanges are competitors if they are both located in the same continent or region. We find that when one stock exchange is merged with...

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