Does Brokerage Commission Determine Market Share of an Online Brokerage?: An Empirical Investigation of Online Brokerage Services

The effectiveness of online medium to brokerage service not only delivers business opportunities but also intensifies competition between online brokerages. Although low price and high quality have received great attention as means of significant customer attraction strategies, there is a paucity of empirical study that investigates these two factors together in the online brokerage area. Hence we utilize price and quality as the lens to examine the determinants of online brokerage’s market share and empirically investigate the effects using firm level panel data spanning 8 years. Our study gives an important warning on the online brokerages’ reckless adoption of commission discount strategy. The quality of the trading system shows the central and dominant contribution to market share. The growing importance of interest revenue in the online brokerage business is also confirmed by our study. Our study delivers valuable implications for online brokerages as well as various e-commerce firms.