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Total factor productivity growth in European stock exchanges: A non-parametric frontier approach

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Author Info
Schmiedel, Heiko (Bank of Finland Research)
Abstract

This paper examines progressive changes in productivity of the European stock exchange industry using non-parametric frontier techniques. Within the framework of Malmquist indices, total factor productivity growth is decomposed into technological progress and technical efficiency change for a balanced panel of all major European stock exchanges over the period 1993–1999. The principal findings indicate an overall rise in productivity over the sample period, which is driven more by technological innovation than by efficiency improvements. According to organisational setup, technological innovation is more pronounced for exchanges with the following characteristics: automation, equity and derivatives trading, for-profit governance structure, large or medium-size capitalised markets. Technological progress can be interpreted as a sign of the dynamic nature of the whole exchange industry, in which stock exchanges take advantage of intense diffusion of new cost-effective technologies and information systems to leverage themselves onto a higher production frontier.

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Publisher Info
Paper provided by Bank of Finland in its series Research Discussion Papers with number 11/2002.

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Length: 41 pages
Date of creation: 17 Jun 2002
Date of revision:
Handle: RePEc:hhs:bofrdp:2002_011

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Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.bof.fi/en/tutkimus
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Related research
Keywords: stock exchanges; productivity; technological progress; Europe;

Other versions of this item:

Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
G29 - Financial Economics - - Financial Institutions and Services - - - Other
O52 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Europe

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Hart, Oliver & Moore, John, 1996. "The Governance of Exchanges: Members' Cooperatives versus Outside Ownership," Oxford Review of Economic Policy, Oxford University Press, vol. 12(4), pages 53-69, Winter.
    Other versions:
  2. Allen N. Berger & David B. Humphrey, 1997. "Efficiency of financial institutions: international survey and directions for future research," Finance and Economics Discussion Series 1997-11, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  3. Diewert, Erwin, 2007. "Index Numbers," UBC Departmental Archives diewert-07-01-03-08-17-23, UBC Department of Economics, revised 31 Jan 2007. [Downloadable!]
  4. Pirrong, Craig, 1999. "The organization of financial exchange markets: Theory and evidence," Journal of Financial Markets, Elsevier, vol. 2(4), pages 329-357, November. [Downloadable!] (restricted)
  5. Schmiedel, Heiko, 2001. "Technological development and concentration of stock exchanges in Europe," Research Discussion Papers 21/2001, Bank of Finland. [Downloadable!]
  6. Economides, Nicholas & Siow, Aloysius, 1988. "The Division of Markets is Limited by the Extent of Liquidity (Spatial Competition with Externalities)," American Economic Review, American Economic Association, vol. 78(1), pages 108-21, March. [Downloadable!] (restricted)
  7. Nicholas Economides, . "Network Economics with Application to Finance," Financial Networks _004, Economics of Networks. [Downloadable!]
  8. Malkamäki , Markku & Topi, Jukka, 1999. "Strategic Challenges for Exchanges and Securities Settlement," Research Discussion Papers 21/1999, Bank of Finland. [Downloadable!]
  9. Malkamaki, M., 1999. "Are There Economies of Scale in Stock Exchange Activities?," Bank of Finland - Studies in Economics and Finance 4/99, Bank of Finland. Research Department..
  10. Malkamäki, Markku, 1999. "Are there Economies of Scale in Stock Exchange Activities?," Research Discussion Papers 4/1999, Bank of Finland. [Downloadable!]
  11. Hasan , Iftekhar & Malkamäki, Markku, 2000. "Are Expansions Cost Effective for Stock Exchanges? A Global Perspective," Research Discussion Papers 20/2000, Bank of Finland. [Downloadable!]
    Other versions:
  12. Gaa, Charles & Stephen Lumpkin & Robert Ogrodnik & Peter Thurlow, 2001. "The Future Prospects for National Financial Markets and Trading Centres," Working Papers 01-10, Bank of Canada. [Downloadable!]
  13. repec:fth:bfdipa:21/2001 is not listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Heiko Schmiedel & Markku Malkamäki & Juha Tarkka, 2004. "Economies of scale and technological development in securities depository and settlement systems," Microeconomics 0405002, EconWPA. [Downloadable!]
  2. Iftekhar Hasan & Heiko Schmiedel, 2004. "Do networks in the stock exchange industry pay off? European evidence," International Finance 0405002, EconWPA. [Downloadable!]
    Other versions:
  3. Heiko Schmiedel & Markku Malkamäki & Juha Tarkka, 2004. "Economies of scale and technological development in securities depository and settlement systems," Microeconomics 0405001, EconWPA. [Downloadable!]
  4. 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. [Downloadable!]
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