Measuring the efficiency of Japanese securities firms

Since Japan’s recent financial liberalization, online securities transactions have proliferated, and changes have been promoted in the securities industry’s structure. This study investigated the differences in efficiency and scale economies between online securities firms and traditional securities firms using the stochastic metafrontier approach based on input and output distance functions. Our findings indicate that online securities firms demonstrate higher metafrontier efficiency in both input and output distance functions. In contrast, traditional securities firms exhibit relatively low efficiency. Moreover, online securities firms enjoy exceedingly large economies of scale and scope derived from the input distance function, indicating clear differences in the business characteristics of the two types of securities firms.