African Journal of
Business Management

  • Abbreviation: Afr. J. Bus. Manage.
  • Language: English
  • ISSN: 1993-8233
  • DOI: 10.5897/AJBM
  • Start Year: 2007
  • Published Articles: 4167

Full Length Research Paper

Demutualization of stock exchanges in Pakistan: Challenges and benefits

Sarah Ahmed, Babar Zaheer Butt and Kashif-Ur-Rehman
  1Iqra University Islamabad, Pakistan. 2Foundation University, Rawalpindi, Pakistan.
Email: [email protected]

  •  Accepted: 10 August 2010
  •  Published: 18 January 2011



Demutualization is a process of segregation of ownership, management and trading membership in an exchange. Studies show that demutualization is a mechanism which minimizes the conflict of interest by reducing the overbearing influence of the members on the affairs and management of the exchange. The Government has initiated demutualization process in Pakistan as part of the capital market reforms program. This paper studies the ongoing process of demutualization in Pakistan and identifies its benefits and challenges. The benefits include better corporate governance, access to economic and human capital, enhancement in listings and international alliances. The study also identifies some challenges which are regulatory framework, conflict of interest, ownership structure issues and agency cost.


Key words: Demutualization, conflict of interest, agency cost, corporate governance, integration and alliance.