A metafrontier study of securities broker and dealer efficiency under zero-sum gains

This paper studies the broker and dealer (B&D) efficiency across groups of securities firms under zero-sum gains (ZSG) framework from the concept of a metafrontier. Existing studies that estimate the firm-level efficiency using conventional data development analysis (DEA) neglect the 100% market share restriction. The empirical findings suggest that the conventional DEA model underestimates the efficiency of inefficient securities firms in Taiwan, as compared to the ZSG-DEA. The output-oriented technology gap ratio of a metafrontier indicates that the foreign ownership form has a significantly positive impact on efficiency in Taiwan. The financial holding companies (FHC) in Taiwan show insignificantly negative effects on their securities subsidiaries. Specialized securities brokerage firms (SBFs) have significantly higher efficiency than Non-FHC's integrated securities firms (ISFs). These results prove that the financial reform triggered by the government is not able to improve B&D efficiency in the securities industry.