Title

Stock Exchange Governance and Market Quality

Publication Type

Journal Article

Publication Date

9-2003

Abstract

We show that organization structure of a stock exchange matters by utilizing the unique setting prevailing in India. India has two major stock markets, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). These two exchanges adopt similar trading systems, trade essentially identical stocks, and follow the same trading hours. However, these exchanges have different organizational structures: BSE is mutualized whereas NSE is demutualized. Using the Hasbrouck [Review of Financial Studies 6 (1993) 191] measure of market quality we show that NSE provides a better quality market than BSE. This result is consistent with the work of Domowitz and Steil [Brookings-Wharton Papers on Financial Services, 1999], who proposed that demutualized exchanges are superior to mutualized in governance.

Keywords

stock exchange governance, demutualization, market quality, India, stock exchange, stock prices

Discipline

Finance and Financial Management | Portfolio and Security Analysis

Research Areas

Finance

Publication

Journal of Banking and Finance

Volume

27

Issue

9

First Page

1859

Last Page

1878

ISSN

0378-4266

Identifier

10.1016/s0378-4266(03)00105-5

Publisher

Elsevier