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| Author: | Krishnamurti, C. Sequeira, J.M. Fangjian, F. |
| Title: | Stock exchange governance and market quality |
| Journal: | Journal of Banking and Finance
2003 : SEP, VOL. 27:9, p. 1859-1878 |
| Index terms: | Stock markets Stock exchanges Markets Quality Trading India Asia |
| Language: | eng |
| Abstract: | This paper shows 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 [in Review of Financial Studies (1993),6, 191] measure of market quality it is shown that NSE provides a better quality market than BSE. This result is consistent with the work of Domowitz and Steil [in Brookings–Wharton Papers on Financial Services, 1999], who proposed that demutualized exchanges are superiour to mutualized in governance. |
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