This study presents a theoretical model to analyze the effect of private equity trading platforms, which have recently experienced rapid growth, on the investment decisions of unlisted companies. As the value of unlisted companies has soared, demand for these stocks has increased. Accordingly, platforms for the brokerage of private stock transactions are being activated. We find that these platforms increase the liquidity in the unlisted stock market by easing regulations on trading of these stocks, further enhancing the firm values and corporate governance of the corresponding firms. In addition, a significant number of unlisted companies are family-owned, in which a manager is also a blockholder. Our study therefore constructs a framework based on a market microstructure model to analyze the impact of unlisted stock trading platforms. In the case of an unlisted firm, a potential dual agency problem exists where the manager, who is also a blockholder, invests less than the external shareholders’ profit-maximizing levels. We find that managers have the incentives to increase firms’ investment when the liquidity in the unlisted stock market improves with the growth of the private equity trading platform, implying that these platforms potentially enhance corporate governance of unlisted companies and promote their growth.

This study analyzes the competition in the outsourced chief investment officer (OCIO) market by utilizing a game-theory approach of multidimensional auctions, which is theoretically identical to the procurement auction system of OCIO selection. Depending on how the OCIO manages the fund, we analyze auctions using two distinct cases. In the first case, the OCIO operates a designated organization for each fund. This case leads to the conclusion that it is difficult for small funds to use OCIO services because of the high operational costs. In the second case, the OCIO manages multiple funds collectively, enabling even small funds to use OCIO services. Korea’s OCIO market currently operates according to the premise of the first case, meaning that small private funds are not likely to use the service even if a fund-type retirement pension is introduced. Thus, our conclusion implies that in the current OCIO structure, it is difficult for the Korean OCIO market to grow significantly. Policies and institutional supplementation are required.

No abstract

No abstract