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Technological development and concentration of stock exchanges in Europe

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Author Info

  • Schmiedel, Heiko

    (Bank of Finland Reseach (Visiting Scholar))

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    Abstract

    This paper provides an explanation of technical inefficiencies of financial exchanges in Europe as well as an empirical analysis of their existence and extent. A single-stage stochastic cost frontier approach is employed, which generates exchange inefficiency scores based on a unique unbalanced panel data set for all major European financial exchanges over the period 1985–1999. Overall cost inefficiency scores reveal that European exchanges operate at 20–25% above the efficiency benchmark. The results also affirm that size of exchange; market concentration and quality; structural reorganisations of exchange governance; diversification in trading service activities; and adoption of automated trading systems significantly influence the efficient provision of trading services in Europe. Over the sample period, European exchanges notably improved their ability to efficiently manage their production and input resources.

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    File URL: http://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/0121.pdf
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    Bibliographic Info

    Paper provided by Bank of Finland in its series Research Discussion Papers with number 21/2001.

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    Length: 41 pages
    Date of creation: 08 Oct 2001
    Date of revision:
    Handle: RePEc:hhs:bofrdp:2001_021

    Contact details of provider:
    Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
    Web page: http://www.suomenpankki.fi/en/
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    Related research

    Keywords: Europe; financial exchanges; panel data; technical efficiency;

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    Cited by:
    1. Schröder, Michael & Köke, Jens, 2002. "The Prospects of Capital Markets in Central and Eastern Europe," ZEW Discussion Papers 02-57, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    2. Ben Slimane, FATEN, 2007. "L'Evolution des Marchés Boursiers Européens: Enjeux et limites
      [European Stock Market Evolution]
      ," MPRA Paper 2607, University Library of Munich, Germany.
    3. Nielsson, Ulf, 2009. "Stock exchange merger and liquidity: The case of Euronext," Journal of Financial Markets, Elsevier, vol. 12(2), pages 229-267, May.
    4. Hasan, Iftekhar & Schmiedel, Heiko, 2004. "Networks and equity market integration: European evidence," International Review of Financial Analysis, Elsevier, vol. 13(5), pages 601-619.
    5. Baris Serifsoy, 2008. "Demutualization, outsider ownership, and stock exchange performance: empirical evidence," Economics of Governance, Springer, vol. 9(4), pages 305-339, October.
    6. Heiko Schmiedel & Markku Malkamäki & Juha Tarkka, 2004. "Economies of scale and technological development in securities depository and settlement systems," Microeconomics 0405001, EconWPA.
    7. Azzam, Islam, 2010. "Stock exchange demutualization and performance," Global Finance Journal, Elsevier, vol. 21(2), pages 211-222.
    8. Hasan, Iftekhar & Schmiedel , Heiko, 2003. "Do networks in the stock exchange industry pay off? European evidence," Research Discussion Papers 2/2003, Bank of Finland.
    9. Heiko Schmiedel & Markku Malkamäki & Juha Tarkka, 2004. "Economies of scale and technological development in securities depository and settlement systems," Microeconomics 0405002, EconWPA.
    10. Hasan, Iftekhar & Malkamäki, Markku & Schmiedel, Heiko, 2002. "Technology, automation, and productivity of stock exchanges: International evidence," Research Discussion Papers 4/2002, Bank of Finland.
    11. Schmiedel, Heiko & Malkamäki, Markku & Tarkka , Juha, 2002. "Economies of scale and technological development in securities depository and settlement systems," Research Discussion Papers 26/2002, Bank of Finland.
    12. Serifsoy, Baris, 2007. "Stock exchange business models and their operative performance," Journal of Banking & Finance, Elsevier, vol. 31(10), pages 2978-3012, October.
    13. Schmiedel, Heiko, 2002. "Total factor productivity growth in European stock exchanges: A non-parametric frontier approach," Research Discussion Papers 11/2002, Bank of Finland.
    14. Faten Ben Slimane, 2012. "Stock exchange consolidation and return volatility," Managerial Finance, Emerald Group Publishing, vol. 38(6), pages 606-627, May.

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