Struggle and Survival on Wall Street: The Economics of Competition among Securities Firms

Struggle and Survival on Wall Street: The Economics of Competition among Securities Firms

Struggle and Survival on Wall Street: The Economics of Competition among Securities Firms

Struggle and Survival on Wall Street: The Economics of Competition among Securities Firms

Synopsis

Struggle and Survival on Wall Street provides a comprehensive economic analysis of competition between broker-dealers or securities firms. It uses the industrial organization approach which focuses on the interaction of the industry's structure, conduct, and performance to argue that the driving force of competition is through the development of new financial products. The development of new products forces firms to integrate these new services into their existing organization. Matthews argues that the firms which successfully integrate and adapt to an expanded product line grow in size and importance relative to those which do not. He also suggests that the Securities and Exchange Commission needs to adapt to the growing services offered by securities firms by providing a framework in which organizational change can take place.

Excerpt

This book is about one of the most important industries in the United States: the broker-dealer industry. Broker-dealers, or securities firms, provide access to stock and bond markets for investors and issuers. The effectiveness with which these markets allocate capital to competing uses determines the overall growth and efficiency of the economy itself.

This industry, compared with other financial service industries, has been underanalyzed by economists, perhaps because there are few data available about the industry. Relatively few securities firms are publicly owned, and several of the most important firms went public only in the 1980s.

It is worthwhile examining this complex and relatively esoteric industry for at least three reasons. First, U.S. securities firms are clearly world leaders in this global industry because they are more innovative and dynamic than any other country's securities firms. They therefore present an excellent case study of how firms adapt to rapidly changing conditions. Second, the industry is a regulated industry with the U.S. Securities and Exchange Commission as its principal regulator. One of the fundamental recommendations of this book is that the regulators continue to provide a framework that allows these firms to adapt and compete effectively in domestic and international markets. Third, the positive performance of the broker-dealer industry relative to that of the banking and savings and loan industries in the 1980s may provide some insights into the past and lessons for the future for the financial services industries.

This book is an industry study within the industrial organization field of economics, and is accessible to a wide variety of readers who have an interest in the securities industry. Although the book assumes some basic knowledge of economics, extensive training is not assumed. The book will be of interest to economists who specialize in industrialization organization, finance, financial institutions, money and banking, and regulated industries. In addition, securities and other financial industry professionals, regulators, students of financial services, members of the securities bar, corporate financial officers, and sophisticated investors will find this book useful.

This book is the extension of a research topic suggested to me by Erwin Blackstone. He, together with Andrew Buck and the late David Meinster, all of Temple Univer sity . . .

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