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Technological development and concentration of stock exchanges in Europe

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  • Schmiedel, Heiko

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.

Suggested Citation

  • Schmiedel, Heiko, 2001. "Technological development and concentration of stock exchanges in Europe," Bank of Finland Research Discussion Papers 21/2001, Bank of Finland.
    • Handle: RePEc:zbw:bofrdp:rdp2001_021
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    Cited by:

    1. Schmiedel, Heiko, 2002. "Total factor productivity growth in European stock exchanges: A non-parametric frontier approach," Bank of Finland Research Discussion Papers 11/2002, Bank of Finland.

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