The Malaysian stock exchange or better known as Bursa Malaysia was listed in 2005 ([Online] Bursa Malaysia, 2010). Prior to being listed, Bursa Malaysia had demutualised itself from the traditional governance structure of not-to profit entity to a for-profit entity. The decision to demutualise and later self-listed itself, was part of the initiative by the Malaysia's capital market regulator i.e. the Securities Commission, Malaysia with the support of the Malaysian Government to make Malaysia a truly competitive and global capital market player. The initiative was part of Malaysia's ten (10) year capital market blue-print, named the Capital Market Masterplan, launched in 2001 (Securities Commission, 2001).
The decision to demutualise and self-listing of Bursa Malaysia is in tandem with the global phenomena surrounding the world's capital market at large. Over the past decades, there was a trend amongst the stock exchanges around the world to shift their present governance structure from the traditional not-to-profit and mutual entity, to a demutualised and for-profit entity. Some of these demutualised exchanges had also self-listed themselves on their respective exchanges. The changing landscapes in the world's capital and financial markets arising from the globalisation were cited as the reason for this new development (Aggarwal, 2002).
Furthermore, it is an open secret that stock exchanges around the world are facing immense pressure to keep up with the dynamics of the capital and financial markets, which led them to change their existing structure to be demutualised and self-listed.
Also, there are several factors that led to demutualisation and self-listing of an exchange. In the case of Singapore Stock Exchange, factors such as globalisation, technology, unclear distinctions between market products and investors' demands led to its being demutualised and self-listed ([Online] Shaw, 2002). The Singapore case was somewhat consistent with earlier findings by (Galper, 2001), where he suggested three (3) new business models for stock exchanges to adopt namely the global exchange, regional exchange and diversified exchange as the results of rapid developments in information and technical technologies, stiff competition amongst exchanges, investors' needs and formulation of better financial products as well as services.
Notwithstanding that, studies have suggested that demutualised as well as publicly listed stock exchanges had performed better, if not encouragingly, in terms of performance, as compared to their private and non-listed counterparts. Several literatures found to be supporting this finding, are as follows:
(Aggarwal, 2002) showed that demutualised and self-listed stock exchanges' results had been encouraging in terms of performance and governance.
(Mendiola & O'hara, 2003) found that most self-listed stock exchanges had better performed its own stock index and IPOs listed on their exchanges.
(Otchere, 2006) showed that demutualised and self-listed exchanges had outperformed the stock market index in the year it listed as well as outperformed the non-listed exchanges.
(Otchere & Abou-Zied, 2007) on their research found that the demutualised and self-listed Australian Stock Exchange had outperformed its stock index as well as its control group, consistent with (Otchere, 2006) earlier findings. The findings also showed that changed in governance had increased its value and benefited the stock market at large.
Therefore, it is not surprising that more than half of the word stock exchanges, which are members of the World federation of Exchanges (WFE), had opted to either demutualised and/or self-listed itself. Statistics from the WFE reported that, as of 2008, a total of eight (8) stock exchanges had demutualised, whilst nineteen (19) stock exchanges became public listed entities, including Bursa Malaysia (WFE, 2008).
Having explained the above, it has sparked my interest to evaluate my own country's stock exchange performance, being a newly self-listed and demutualised entity. Thus, for my dissertation, I intend to analyse the performance of Bursa Malaysia post demutualisation and self-listing. Moreover, I would like to examine whether the similar positive outcomes found in (Aggarwal, 2002), (Mendiola & O'hara, 2003) and (Otchere, 2006) can be found in Bursa Malaysia. In general, my proposed dissertation would be modelled based on (Otchere & Abou-Zied, 2007) study on the Australian Stock Exchange.
Research Questions and Objectives
The following are the research questions and objectives designed for my proposed dissertation:
To evaluate the performance of Bursa Malaysia, pre and post demutualisation and self-listing on the exchange, by scrutinising both its market and operating performance.
Also, to examine the market quality of Bursa Malaysia before and after its demutualisation and self-listing on the exchange.
To draw a conclusion about the decision undertaken by Bursa Malaysia, and its performance arising from the demutualisation and self-listing.
To a certain extent, gauge whether the demutualisation and self-listing of Bursa Malaysia achieves the target envisaged in Malaysia's 10-year capital market blue-print i.e. the Capital Market Masterplan, launched in 2001.
Method
In this proposed dissertation, I intend to use the explanatory study approach. This approach would be applied using the case study method. As per my proposed dissertation title, I would be undertaking a case study on Bursa Malaysia, whereby its performance both before and after demutualisation and self-listing would be assessed.
First, an in-depth or further literature review on my dissertation topic would be undertaken. This would be done by searching and reviewing more of relevant journals/ working papers/articles related to the dissertation topic. This is to further support my understanding on my dissertation topic. Also, at the same time, helps me in forming the correct dissertation hypothesis.
Next, in carrying out the research analysis i.e. the assessment of Bursa Malaysia's market and operating performance, a period of an approximately forty eight (48) months post-listing and thirty six (36) months pre-listing would be taken as the study period. Further, similar techniques done by the previous researchers i.e. based on the study conducted by (Otchere & Abou-Zied, 2007) would be employed, as follows:
Operating performance
In this part of analysis, Bursa Malaysia would be compared with those of non-listed exchanges, in terms of profitability i.e. return on assets (ROA) and return on equity (ROE), as well as product market indicators such as listing revenue, trading revenue, information revenue and non-traditional revenue. As for the selection of non-listed stock exchanges, it would be taken from the list in the (WFE, 2008) from various countries across the globe.
Stock market performance
For long term stock market performance, Bursa Malaysia would be benchmarked against the stock exchange key index indicator i.e. FBMKLCI, and financial or financial related services companies, which were listed in the same year. In this analysis, the market-adjusted cumulative abnormal returns (CAR) method would be used since Bursa Malaysia and the selected comparing companies do not have stock price data prior to being listed. Here, the calculation of CAR method would be the difference between Bursa Malaysia/selected companies' returns and the returns FBMKLCI index indicator. It will be calculated over 48 months post-listing. Subsequently, t-statistics will be used to further analyse the results with the appropriate hypothesis.
Market quality performance
As for market quality performance assessment, it would be evaluated using the transaction cost using the bid-ask price for Bursa Malaysia. Citing (Otchere & Abou-Zied, 2007), the formula to be applied in this assessment is, as follows:
Legend:
Sni: effective bid-ask spread for firm i in period n,
A: daily ask price,
B: daily bid price
P: closing price
Having explained the methodology above, the data to be used for my dissertation would typically be secondary data. The data would be in the form of documentary secondary data (Saunders et. al., 2009), such as the exchanges' annual reports, statistical reports etc.
Besides that, data such as the quoted prices for stock exchanges would be available through the University of Leeds' subscribed database i.e. the Thomson ONE Banker database.
It is believed that with all these methods being applied using the available information, a reliable conclusion can be drawn, as well as answering the questions and objectives for this proposed dissertation.
Timescale
The time planned for this dissertation is approximately four (4) months, beginning 5 May 2010 - 2 September 2010. Below is an abridged action plan for this dissertation.
May 2010
Week 1 (5 May 2010): Submit dissertation proposal
Week 2-3: Gather and review of literature on the topic
Week 4: Draft dissertation literature review
June 2010
Week 2: Obtain feedback on the dissertation proposal
Week 3-4: Collect and analyse secondary data
July 2010
Week 3: Data analyses completed
Week 4: Write findings and draft full dissertation
August 2010
Week 3: Finalising draft dissertation
Week 4: Send draft dissertation to supervisor for feedback
September 2010
Week 1 (2 September 2010): Submit dissertation
For ease of reference and better planning of my dissertation, details of my action plans have been documented and tabulated in the following Gantt chart (Table1).
Table 1: Gantt chart
Key dates:
5 May 2010: Deadline submission of dissertation proposal.
23 August 2010: Tentative date to submit draft dissertation to supervisor
2 September 2010: Dissertation submission due date.
Resources
In carrying out the data analyses, I have access to use the Leeds University Business School's SAS software. For some analyses, Microsoft Excel spreadsheet or even SPSS software may be used for the same purpose.
As far as the data collection is concerned, annual reports and certain statistics can be downloaded through the exchanges' websites. These data can be accessed and downloaded via the exchanges' respective websites. The following are some of the examples:
Bursa Malaysia
http://www.klse.com.my/website/bm/about_us/downloads/ir_annual_report.html
Indonesia Stock Exchange (non-listed)
http://www.idx.co.id/MainMenu/TentangBEI/AnnualReport/tabid/64/lang/en-US/language/en-US/Default.aspx
Taiwan Stock Exchange (demutualised but non-listed)
http://www.twse.com.tw/en/about/company/annuals.php
Australian Stock Exchange (demutualised and self-listed)
http://www.asx.com.au/about/shareholder/publications.htm
In the event some of the required exchange's data are not available online or in the annual reports, or in the Thomson ONE Banker database; the relevant exchange(s) would be contacted for assistance.
References and Bibliographies
Aggarwal, R. (2002). Demutualization and Corporate Governance of Stock Exchanges. Journal of Applied Corporate Finance 15( 1), pp.105-113
Bursa Malaysia. 2010. Bursa Malaysia's (History) website. [Online]. [Accessed 29 April 2010]. Available from: http://www.bursamalaysia.com/website/bm/about_us/the_organisation/history.html
Galper, J., 1999. Three business models for the stock exchange industry. Working Paper. International Federation of Exchange
Mediola A., O'Hara, M., 2003. Taking Stock in Stock Markets: The Changing Governance of Exchanges. Working Paper. Cornell University
Otchere, I. 2006. Stock exchange self-listing and value effects. Journal of Corporate Finance 12 (2006), pp.926-953.
Otchere, I., Abou-Zied, K. 2007. Stock exchange demutualization, self-listing and performance: the case of Australian Stock Exchange. Journal of Banking & Finance 32 (2008), pp.512-525.
Saunders, M et. al. 2009. Using secondary data. In Research Methods for Business Students. Edinburgh. FT Prentice Hall. pp256-287
Securities Commission, Malaysia. 2001. Capital Market Masterplan Malaysia, Chapter 4 Recommendations. pp.119-120.
Shaw, A. 2002. Singapore Stock Exchange - Demutualization and Listing of the Singapore Exchange Limited. In Demutualization of Stock Exchanges: Problems, Solutions and Case Studies. [Online]. Asian Development Bank. [Accessed 1 May 2010]. Available from: http://www.adb.org/documents/books/demutualization_stock_exchanges/default.asp & http://www.adb.org/documents/books/demutualization_stock_exchanges/chapter_15.pdf. pp.265-266
World Federation of Exchanges. 2009. Cost and Revenue Survey of 2008.
