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

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  • Schmiedel, Heiko

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.Key words: stock exchanges, productivity, technological progress, Europe JEL classification numbers: D24, G29, C23, O52

Suggested Citation

  • Schmiedel, Heiko, 2002. "Total factor productivity growth in European stock exchanges : A non-parametric frontier approach," Research Discussion Papers 11/2002, Bank of Finland.
  • Handle: RePEc:bof:bofrdp:2002_011
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    References listed on IDEAS

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    8. Malkamäki, Markku & Topi, Jukka, 1999. "Strategic challenges for exchanges and securities settlement," Research Discussion Papers 21/1999, Bank of Finland.
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    12. 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.
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    Citations

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    Cited by:

    1. Heiko Schmiedel & Markku Malkamäki & Juha Tarkka, 2004. "Economies of scale and technological development in securities depository and settlement systems," Microeconomics 0405002, University Library of Munich, Germany.
    2. Li, Shaofang & Marinč, Matej, 2018. "Economies of scale and scope in financial market infrastructures," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 53(C), pages 17-49.
    3. Josanco Floreani & Maurizio Polato, 2010. "Consolidation and Business Strategies in the Securities Industry: How Securities Exchanges Create Value?," Research in World Economy, Research in World Economy, Sciedu Press, vol. 1(1), pages 28-42, November.
    4. Hasan, Iftekhar & Schmiedel, Heiko, 2003. "Do networks in the stock exchange industry pay off? : European evidence," Research Discussion Papers 2/2003, Bank of Finland.
    5. Serifsoy, Baris, 2007. "Stock exchange business models and their operative performance," Journal of Banking & Finance, Elsevier, vol. 31(10), pages 2978-3012, October.
    6. 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.
    7. Schmiedel, Heiko & Malkamaki, Markku & Tarkka, Juha, 2006. "Economies of scale and technological development in securities depository and settlement systems," Journal of Banking & Finance, Elsevier, vol. 30(6), pages 1783-1806, June.
    8. Maurizio Polato & Josanco Floreani, 2012. "Consolidation in the Exchange Industry: What are Exchanges Actually Worth? Some Evidence from a Crises Environment," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 19(2), pages 195-203, November.
    9. Heiko Schmiedel & Markku Malkamäki & Juha Tarkka, 2004. "Economies of scale and technological development in securities depository and settlement systems," Microeconomics 0405001, University Library of Munich, Germany.
    10. Giovanna Zanotti, 2012. "Demutualization and the Globalization of Stock Markets," Chapters, in: Geoffrey Poitras (ed.), Handbook of Research on Stock Market Globalization, chapter 7, Edward Elgar Publishing.
    11. Azzam, Islam, 2010. "Stock exchange demutualization and performance," Global Finance Journal, Elsevier, vol. 21(2), pages 211-222.

    More about this item

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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