Demutualisation of Stock Exchanges in India: The Corporate Governance Chapter

Abstract

The Indian stock exchanges were mostly broker dominated, and the concept of governance was not given the due importance it deserves. This resulted in erosion of investors’ wealth and ultimately their confidence in the stock market. Since investors are the backbone of any stock exchange, it got necessary to infuse a sense of confidence among the investors. That is how the corporatisation of stock exchanges took place for streamlining the process of corporate governance. Corporate governance is one of the most pivotal issues associated with demutualisation of stock exchanges. On account of recovering markets due to subprime crisis in 2007–2008 and the global recession, for better corporate management, the corporate governance of the stock market becomes all the more relevant. This paper highlights the fundamental issues in the demutualisation of these stock exchanges and their facelift for better governance structure in the said context. The primary contribution this study seeks to make is in the sphere of corporate governance related to the process of demutualisation of Indian stock exchanges in this phase of markets rebuilding. It is hoped that it will improve the investors’ perception about the reliability of stock exchanges and promote better spirit of trust and governance.