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Article
Publication date: 14 May 2018

Laura Padilla-Angulo and Faten Ben Slimane

The purpose of this paper is to study corporate governance restructuring strategies of companies to adapt to new market conditions following conversion into a for-profit…

Abstract

Purpose

The purpose of this paper is to study corporate governance restructuring strategies of companies to adapt to new market conditions following conversion into a for-profit structure. It focuses on the changes in the composition of the board of directors.

Design/methodology/approach

The paper conducts a field experiment using stock exchanges, which have become more international over time, and many of which have been forced to demutualize and convert to for-profit structures to compete more efficiently. The paper does a fine-grained analysis of restructuring in the composition of the board using the ANOVA technique. The paper also examines the impact of this board composition restructuring on the reputation of the exchanges using a regression technique.

Findings

The authors find that the stock exchanges restructured board composition and refocused them to create better value. Results suggest that the conversion of a company to a for-profit structure brings efficiencies when accompanied by changes in the governing bodies. The authors also find that converting to for-profit firms had a positive impact on the reputation of the exchanges. The positive impact was even greater when accompanied by changes in board composition.

Research limitations/implications

A stronger focus on the corporate governance dimension to understand the successful demutualization of stock exchanges is needed.

Originality/value

The authors analyze the corporate governance dimension during demutualization processes of an under examined sector. The financial performance of the stock exchanges the authors study significantly improved after their conversion to for-profit organizations and provide an example of successful corporate governance restructuring.

Details

Journal of Organizational Change Management, vol. 31 no. 3
Type: Research Article
ISSN: 0953-4814

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Article
Publication date: 1 November 2005

Kevin Davis

This paper reviews experience with credit union demutualisation to date in the light of increasing discussion about whether demutualisation is a likely (or inevitable…

Abstract

This paper reviews experience with credit union demutualisation to date in the light of increasing discussion about whether demutualisation is a likely (or inevitable) future stage in the evolutionary process. It is argued that the credit union industry faces an inherent demutualisation bias which emerges as the sector develops maturity. Contributing factors include the emergence of professional management pursuing personal objectives, together with the economic realities of technological change, financial liberalisation, increased competition, and prudential regulation based on minimum capital requirements. Demutualisation incentives may partially reflect the unsuitability of the mutual form of governance in larger, more sophisticated financial institutions, but there is also a significant risk of demutualisation based on wealth expropriation motives. Alternative policies and strategies which might avoid this demutualisation bias are examined.

Details

Managerial Finance, vol. 31 no. 11
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 10 April 2009

Robin Klimecki and Hugh Willmott

This paper aims to examine the influence of neoliberalist deregulation on the rash of demutualisations of the 1990s. It explores the extent to which the demutualisation of…

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Abstract

Purpose

This paper aims to examine the influence of neoliberalist deregulation on the rash of demutualisations of the 1990s. It explores the extent to which the demutualisation of two building societies – Northern Rock and Bradford & Bingley – and their subsequent demise in the wake of the credit crunch exemplify key features of the neoliberalist experiment, with a particular focus on their post‐mutualisation business models.

Design/methodology/approach

The analysis draws on literature that examines the neoliberal development of the financial sector and examines the media coverage of the financial crisis of 2007/2008 to study the discursive and material conditions of possibility for the development and implosion of the business models used by Northern Rock and Bradford & Bingley.

Findings

The paper argues that the demutualisation of Northern Rock and Bradford & Bingley was part of a broader neoliberal movement which had processes of financialisation at its centre. By converting into banks, former building societies gained greater access to wholesale borrowing, to new types of investors and to the unrestricted use of financial instruments such as securitisation. The collapse of Northern Rock and Bradford & Bingley is interpreted in the light of their access to these new sources of funding and their use of financial instruments which were either unavailable for, or antithetical to, the operation of mutual societies.

Research limitations/implications

The paper comments on the contemporary features and current effects of the 2007/2008 crisis of liquidity, whose full long‐term consequences are uncertain. Further research and future events may offer confirmation or serve to qualify or correct its central argument. The intent of the paper is to provide a detailed analysis of the conditions and consequences of building society demutualisation in the context of the neoliberal expansion of the financial sector that resulted in a financial meltdown. It is hoped that this study will stimulate more critical analysis of the financial sector, and of the significance of financialisation more specifically.

Originality/value

The paper adopts an alternative perspective on the so‐called “subprime crisis”. The collapse of Northern Rock and Bradford & Bingley is understood in relation to the expansion, and subsequent crisis, of financialisation, in which financial instruments such as collateralized debt obligations and credit default swaps were at its explosive centre, rather than to the expansion of subprime lending per se. Demutualisation is presented as a symptom of neoliberalism, a development that, in the UK, is seen to have contributed significantly to the financial meltdown.

Details

Critical perspectives on international business, vol. 5 no. 1/2
Type: Research Article
ISSN: 1742-2043

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Article
Publication date: 16 November 2010

Robert Webb, Cormac Bryce and Duncan Watson

This paper aims to investigate the effect of UK building society demutualisation on levels of efficiency at the largest five commercial banks in the UK.

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1117

Abstract

Purpose

This paper aims to investigate the effect of UK building society demutualisation on levels of efficiency at the largest five commercial banks in the UK.

Design/methodology/approach

This research utilises data envelopment analysis (DEA) within a rarely adopted windows framework to analyse efficiency. The study also incorporates a novel risk proxy in the profit‐orientated approach to determine DEA input/output which proves a useful innovation to the methodology.

Findings

The overall aggregate results suggest that converting building societies outperformed their bank counterparts in all areas of efficiency and that scale efficiency dominates pure technical efficiency. Interestingly, the results also indicate that the level at which institutions continue to find economies of scale had increased when compared to previous research.

Originality/value

The period of building society demutualisation offers an empirical opportunity to examine deregulation upon market participants. It is felt that this study offers academics, regulators and participants within the financial services environment an insight into the efficiency impact of deregulation.

Details

Journal of Financial Regulation and Compliance, vol. 18 no. 4
Type: Research Article
ISSN: 1358-1988

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Article
Publication date: 1 September 2000

A. Baker and S. Thompson

Summarizes the reasons for and methods of regulation in worldwide capital markets; and describes in detail the development, governance and regulatory structure of the…

Abstract

Summarizes the reasons for and methods of regulation in worldwide capital markets; and describes in detail the development, governance and regulatory structure of the Warsaw stock exchange (Poland). Uses a variance ratio approach based on Lo and MacKinlay (1988, 1989) to examine price behaviour in the exchange from 1991 to 1995, shows that it is not a random walk market and puts forward possible explanations for its market inefficiency. Considers the implications for the Polish economy and suggests that public policymakers could tighten securities laws and exchange rules to improve the efficiency of this emerging capital market.

Details

Managerial Finance, vol. 26 no. 9
Type: Research Article
ISSN: 0307-4358

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Book part
Publication date: 10 April 2013

Güler Aras and Banu Yobaş

The governance of capital market institutions did not receive much interest compared to their banking sector counterparts, partly due to their different ownership…

Abstract

The governance of capital market institutions did not receive much interest compared to their banking sector counterparts, partly due to their different ownership structures. Recent trends; increased competition, technological advances, structural changes, globalization, all had their share of impact on governance systems of capital markets institutions particularly on exchanges. Corporate governance of non-financial firms and capital markets institutions differ in several ways. Firstly the role of risk management differs since they may impose systemic risks to the financial system. Secondly well-implemented governance structures and processes are required but are not sufficient in capital markets since there are several conflicts of interests to be addressed. Therefore whether and how effectively they function is what matters. Thirdly the governance structures of such institutions exhibit different effectiveness on their decisions.The governance of FIs in capital markets is discussed in terms of board structure and management, risk governance, supervisors, shareholders, executive compensation, role of regulators, authorities and values and culture. The role of stock exchanges in corporate governance are discussed separately in terms of implementing corporate governance codes, demutualisation and its impact on regulations, transparency and accountability issues and the effects of M&As among exchanges. Market needs strong analytical tools and reliable benchmarks to assess governance risk. The corporate control and the regulation of the institutions by the exchanges when the corporations (regulated) are the competitors of the exchanges (regulators) or owned by the stockholders of the exchanges must be addressed. The risk of regulatory arbitrage, calls for the need of harmonisation among regulators. Better regulation of FIs and greater global coordination among regulators are seen as the most two important issues to prevent another crisis.

Details

The Governance of Risk
Type: Book
ISBN: 978-1-78190-781-8

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Article
Publication date: 14 October 2009

Hongwei He and Yehuda Baruch

The objective of this paper is to report a case study investigating how organizational identity evolves during institutional change within a UK building society.

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5550

Abstract

Purpose

The objective of this paper is to report a case study investigating how organizational identity evolves during institutional change within a UK building society.

Design/methodology/approach

The paper employs an inductive case study, which is appropriate for examining such change processes. It builds on grounded theory, considered appropriate for such an explanatory research.

Findings

The paper finds that: institutional change, especially regulation and practice changes, serves as the trigger to increasing salience of identity issues, i.e. identity ambiguity, legitimacy crisis and perceived identity obsolescence; leadership, organizational culture and strategic exercises are salient apparatuses to tackle identity problems caused by external pressure; and a new identity is formed as a result of the managerial interventions, characterised by the rediscovery of historical roots, modernization and dualism.

Research limitations/implications

The paper provides an account of identity change, given a broader business environment change context within which the organization operates. Utilizing qualitative study of one case may be taken as a limitation.

Originality/value

The theoretical contribution reflected in the findings has implications for the interfaces between identity and institutional environment and organizational culture.

Details

Journal of Organizational Change Management, vol. 22 no. 6
Type: Research Article
ISSN: 0953-4814

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Article
Publication date: 2 December 2020

Anshi Goel, Vanita Tripathi and Megha Agarwal

The present study seeks to investigate the relative edge between the market microstructure of the two leading stock exchanges of the Indian capital market, that is BSE and…

Abstract

Purpose

The present study seeks to investigate the relative edge between the market microstructure of the two leading stock exchanges of the Indian capital market, that is BSE and NSE with a focus on analysing their trading mechanism, efficiency, liquidity and volatility.

Design/methodology/approach

We analyse the microstructure of BSE and NSE on the basis of: (1) trading mechanism – ownership structure, listing of securities, trading system and settlement and clearing process; (2) information efficiency using unit root test, serial correlation, runs test, variance ratio and the ARIMA model; (3) liquidity using trading statistics no. of listed Companies, market capitalisation, no. of trades etc. and (4) volatility using standard deviation and GARCH(1,1) model.

Findings

A comprehensive scrutiny on microstructure of BSE and NSE makes it evident that the two leading stock exchanges of India are mostly similar and leave no scope to choose between them. Both the exchanges are demutualised corporate entities with a fully automated trading system in an order-driven market, informationally inefficient as evidenced by the predictability of returns, have shown tremendously growing trading statistics and by and large a declining trend in volatility over the years.

Practical implications

Understanding the components of the microstructure black-box will provide the regulatory bodies with an intellectual framework to strengthen the market architecture. Both the exchanges will get aware of the dynamics of trading, can grow to be more competitive and attract more firms for listing and investors for trading of securities. Also, investors, portfolio managers and equity analysts will be able to make better investment strategies by understanding how the market works.

Originality/value

Research in the area of market microstructure has been severely neglected, especially in the context of the Indian market. India is the world's fastest growing economies and we have witnessed tremendous reforms in the capital market. The past two and a half decades have brought about several innovations via demutualisation, screen-based trading, emergence of clearing corporations, innovative financial products and intense use of IT in the Indian stock market. A spurt of reforms and the emerging environment make it crucial to deeply analyse the market structure and design of two premier stock exchanges of India – BSE and NSE.

Details

Journal of Advances in Management Research, vol. 18 no. 3
Type: Research Article
ISSN: 0972-7981

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Article
Publication date: 1 July 2006

Datuk Simon Shim

To demonstrate that Malaysia has taken serious measures to improve corporate governance landscape.

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2653

Abstract

Purpose

To demonstrate that Malaysia has taken serious measures to improve corporate governance landscape.

Design/methodology/approach

Enforcement actions are used as a case study to show the effect of certain measures undertaken by the regulatory authorities to combat economic crime.

Findings

There was a drop in prosecutions and other enforcement actions following the introduction of compulsory directors trainings.

Research limitations/implications

Recommendations are made for a smart partnership between the government, regulators and the private sector to improve governance in the markets.

Originality/value

Corporate law and securities law require a sound framework that would promote a safe competitive and orderly market for investors in Malaysia.

Details

Journal of Financial Crime, vol. 13 no. 3
Type: Research Article
ISSN: 1359-0790

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Article
Publication date: 1 January 2000

BRANDON BECKER, STUART KASWELL, JUDY POPPALARDO and CHERIE MACAULEY

The growth of new trading opportunities, advances in technology, and investor interest in fast, cheap execution have all challenged the dominance of traditional exchanges…

Abstract

The growth of new trading opportunities, advances in technology, and investor interest in fast, cheap execution have all challenged the dominance of traditional exchanges and encouraged the development of alternative trading systems. This article explores the vigorous debate among market participants that has ensued, and outlines their various positions on how these developments should impact the existing regulatory structure.

Details

Journal of Investment Compliance, vol. 1 no. 1
Type: Research Article
ISSN: 1528-5812

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