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Reshaping financial systems. New technologies and financial innovations - evidence from the United States, Mexico and Brazil

Author

Listed:
  • Ewa Lechman

    (Gdansk University of Technology, Gdansk, Poland)

  • Adam Marszk

    (Gdansk University of Technology, Gdansk, Poland)

Abstract

The paper unveils whether ICT diffusion determines development of financial innovation in emerging economies. Particularly, we examine the impact of ICT adoption on changing values of exchange traded funds in Brazil and Mexico, comparing it to the United States as reference country (benchmark). Our methodological framework includes descriptive statistics, logistic growth models (used to estimate ETFs growth) and generalized linear models (used to check for relationship between ICT adoption and ETFs value). In each case we run country-specific estimates. Data on ICT adoption (approximated by Internet Users and Fixed Broadband Subscriptions) are exclusively derived from World Telecommunication/ICT Indicators Database 2012 (16th edition), and exchange traded funds from funds’ providers and reports published by BlackRock. Analysis period is set for 2000-2012. Empirical findings collectively conclude that in all three countries, growth of ICT was pervasive, and this was accompanied by fast development of exchange traded funds in Mexico and in the United States, measured by increases in assets under management. Moreover, in the period 2002-2012 Mexico has caught up with the United States in terms of ETFs share in total investment funds (sum of assets of ETFs and mutual funds). In Brazil, even though ETFs growth rates were high, in 2012 share of ETFs in investment funds remained at a relatively lower level of 0.17%. Additionally, the relationship between ICT adoption and ETFs development was reported as strong, positive and statistically significant in each of analyzed countries.

Suggested Citation

  • Ewa Lechman & Adam Marszk, 2014. "Reshaping financial systems. New technologies and financial innovations - evidence from the United States, Mexico and Brazil," GUT FME Working Paper Series A 20, Faculty of Management and Economics, Gdansk University of Technology.
    • Handle: RePEc:gdk:wpaper:20
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    References listed on IDEAS

    as
    1. Ewa Lechman, 2013. "New Technologies Adoption And Diffusion Patterns In Developing Countries. An Empirical Study For The Period 2000-2011," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 8(4), pages 79-106, December.
    2. W. Scott Frame & Lawrence J. White, 2004. "Empirical Studies of Financial Innovation: Lots of Talk, Little Action?," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 116-144, March.
    3. Laurent Deville, 2008. "Exchange Traded Funds: History, Trading, and Research," Springer Optimization and Its Applications, in: Constantin Zopounidis & Michael Doumpos & Panos M. Pardalos (ed.), Handbook of Financial Engineering, pages 67-98, Springer.
    4. Geert Bekaert & Campbell R. Harvey & Christian Lundblad, 2007. "Liquidity and Expected Returns: Lessons from Emerging Markets," The Review of Financial Studies, Society for Financial Studies, vol. 20(6), pages 1783-1831, November.
    5. Ivan Diaz-Rainey & Gbenga Ibikunle, 2012. "A taxonomy of the 'dark side' of financial innovation: the cases of high frequency trading and exchange traded funds," International Journal of Entrepreneurship and Innovation Management, Inderscience Enterprises Ltd, vol. 16(1/2), pages 51-72.
    6. Geroski, P. A., 2000. "Models of technology diffusion," Research Policy, Elsevier, vol. 29(4-5), pages 603-625, April.
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    8. Franklin Allen, 2012. "Trends in Financial Innovation and their Welfare Impact: an Overview," European Financial Management, European Financial Management Association, vol. 18(4), pages 493-514, September.
    9. Franklin Allen, 2012. "Trends in Financial Innovation and Their Welfare Impact: An Overview," DNB Working Papers 355, Netherlands Central Bank, Research Department.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    emerging markets; ICT; ETFs;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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