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Are super stock exchange mergers motivated by efficiency or market power gains?

Isaac Otchere and Kobana Abukari

Journal of International Financial Markets, Institutions and Money, 2020, vol. 64, issue C

Abstract: Stock exchange mergers can lead to increased efficiency; however, increasing levels of concentration can potentially lead to the exercise of market power. We investigate the market power repercussions of stock exchange mergers and find that the industry’s concentration levels have not significantly increased and the concentration levels do not influence exchanges’ profitability in the post-merger period. The profitability of the merging exchanges in the post-merger period is largely influenced by efficiencies in revenue generation and cost management. The absence of evidence that stock exchange mergers lead to the exercise of market power suggests that there does not appear to be an immediate need for regulatory agencies to be overly concerned about mergers among stock exchanges leading to the exploitation of market power to the detriment of consumer welfare.

Keywords: Stock exchange mergers; Market power; Profitability (search for similar items in EconPapers)
JEL-codes: G15 G34 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:64:y:2020:i:c:s1042443119304883

DOI: 10.1016/j.intfin.2019.101164

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Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely

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