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Do networks in the stock exchange industry pay off? European evidence

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  • Iftekhar Hasan

    (Rennselaer Polytechnic Institute & Bank of Finland)

  • Heiko Schmiedel

    (HWWA-Hamburg Institute of International Economics & Bank of Finland)

Abstract

The economic theory of network externalities provides the rationale for this paper, which investigates whether adoption of network strategies in European stock exchanges creates additional value in the provision of trading services. Using unbalanced panel data from all major European exchanges over the period 1996–2000, the paper examines empirically the presence of network effects on the liquidity, growth, and efficiency of the exchanges; the transaction cost of trades; and the cost of exchange operations. The evidence shows that adopting a network strategy is significantly associated with higher liquidity, growth and efficiency in the sample markets. Moreover, a network strategy helps to reduce transaction costs of trades as well as operational costs for stock exchanges

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Bibliographic Info

Paper provided by EconWPA in its series International Finance with number 0405002.

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Date of creation: 03 May 2004
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Handle: RePEc:wpa:wuwpif:0405002

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Web page: http://128.118.178.162

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Keywords: stock exchanges; network externalities; remote access; Europe;

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References

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Citations

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Cited by:
  1. Jukka Vauhkonen, 2004. "Banks' equity stakes in borrowing firms: A corporate finance approach," Game Theory and Information 0404003, EconWPA.
  2. Jukka Vauhkonen, 2004. "Financial contracts and contingent control rights," Finance 0404022, EconWPA.
  3. Vello Vensel, 2004. "Operation of Business Supporting Networks: Evidence from an EU Candidate Country," Working Papers, Tallinn School of Economics and Business Administration, Tallinn University of Technology 117, Tallinn School of Economics and Business Administration, Tallinn University of Technology.
  4. Guender, Alfred V., 2003. "Optimal discretionary monetary policy in the open economy: Choosing between CPI and domestic inflation as target variables," Research Discussion Papers 12/2003, Bank of Finland.
  5. Serifsoy, Baris & Wei[ss], Marco, 2007. "Settling for efficiency - A framework for the European securities transaction industry," Journal of Banking & Finance, Elsevier, vol. 31(10), pages 3034-3057, October.
  6. David T. Llewellyn & David G. Mayes, 2004. "The role of market discipline in handling problem banks," Finance 0404020, EconWPA.
  7. Kaie Kerem & Vello Vensel, 2005. "Theory and Empirical Evidence of Business Support Networks," Working Papers, Tallinn School of Economics and Business Administration, Tallinn University of Technology 129, Tallinn School of Economics and Business Administration, Tallinn University of Technology.

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