Demutualization refers to the process of changing the ownership structure of a member-owned (or mutually-owned) financial institution into a shareholder-owned corporation. High-profile demutualizations amongst securities-trading exchanges such as the NYSE and the CME are best known but demutualization has also become common among life insurers and building societies.
Financial institutions that demutualize receive large influxes of capital from their new owners plus easier access to future capital through the financial markets and so is common amongst mutually-owned instututions that need to invest in growth to compete. Life insurers were amongst the earliest pioneers of demutualization but the 1980s and 1990s saw a wave first among building societies and then producer co-operatives and trading exchanges.
The 20-year push for demutalization by member-held public trading co-operatives is now being felt in some of the investing world's frontier markets. The latest global exchange to put demutualization on its agenda is Kenya's Nairobi Stock Exchange (NSE), the fifth-largest in Africa. New NSE chief executive Peter Mwangi said on taking office in November 2008 that demutualization of the exchange ranked "very, very highly" on his to-do list.
- Financial & Investment Dictionary: Demutualization. Answers.com.
- Demutualization. Wikipedia.com.
- Kenya's bourse appoints new chief executive. Reuters.