Cracks in the Temple of Global Finance : Governance, Regulation, Technology and the Future of Demutualised Exchanges

This dissertation consists of three articles, examining the performance of demutualized securities exchanges from 2000 to 2011, in view of changes in governance and regulation. The first part is an empirical study of the influence of each type of shareholder (financial investor, broker, strategic or widely-held shares). The results show that fragmented ownership is correlated with lower performance and investment managers' presence with higher performance; strategic investors are on balance detrimental to shareholder value. The second article looks at the same exchanges individually, through case studies. The findings of the first article are validated. However, a closer look at strategic investors shows three outcomes: when they consist of founders, they increase shareholder value; when they are employed managers, they decrease it; and when the strategic investor is a competitor, the target company's performance becomes more volatile. The third article looks at the combination of technology and regulation. Through mean comparisons and a difference-in-differences approach, this section shows that recent market deregulation has allowed high-tech start-ups to challenge the dominance of the established exchanges, just like previous coincidences of regulatory and technological change resulted in significant market upheavals: the disappearance of London's jobbers following Big Bang and the Eurocurrency market displacing New York as a major center for dollar borrowing and lending. This dissertation introduces two new concepts: “quasi-agent principals” (shareholders who destroy value in their investment as a result of their conflicts of interest) and the “adjuvant effect” (when the combined effect of regulation and technology is a multiple of the effects of each)