BENEFIT ANALYSIS OF A DEVELOPING MARKETS STOCK EXCHANGE MERGERS: CASE OF A BORSA ISTANBUL AND SARAJEVO STOCK EXCHANGE
Abstract: Whether due to mentality or the lack of investment ‘culture’, but people in the Balkans have certain repulsion towards investing in financial instruments offered by the local exchanges. Based on the public opinion one can conclude that most of the people are reluctant to invest in the financial instruments because they can’t rely on the trustworthiness and credibility of the local exchanges, due to corruption scandals, misconduct and wrongdoings that happened in the recent history. Since its inception, Sarajevo Stock Exchange has been suffering from extremely low volume and poor investment liquidity that in the end resulted with choppiness and overall instability in the market. Turkey’s main stock exchange, Borsa Istanbul, which is 80 times larger than SASE, has openly expressed interest in direct cooperation with Sarajevo Stock Exchange and that strategic move can certainly reduce or even eliminate problems local investors face. This study examines the effect of benefits and costs of the cooperation between Borsa Istanbul and Sarajevo Stock Exchange (SASE). Multiple facets of the benefits and costs are examined and their effect on the macro and micro scale. Macro effects of the raising stake of Borsa Istanbul in SASE include effects on government, municipality and overall economic level, while micro effect is the direct effect to the ‘end-consumer’, a small investor. The secondary data will be used in analysis of benefits to costs with the side by side comparison and eventual derivation of the Benefit/Cost ratio (BCR) that will test the hypothesis that benefits highly outweigh the costs in this cooperation. The research shows that raising the stake of Borsa Istanbul in SASE will bring a new level of professionalism and trust in a corruption and unprofessionalism ridden SASE. In addition Borsa Istanbul will open new market horizons to investors from Bosnia and as an outcome we should see and increase in market liquidity, trading volume and even the BDP of both countries.
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