Economic modeling of Korean private equity market through comparisons of market structures and investment strategies between the Korean and American private equity market

Modem capitalist societies depend on entrepreneurship for their progress. Entrepreneurs seek profits by introducing new goods, services, and technologies and, in doing so, they advance the economic welfare of society. To maintain and further entrepreneurial activities, each society requires a well-organized resource allocation system that can distribute resources to selected industries or firms. The private equity market is an efficient resource allocation system that provides equity capital to the firms not quoted in the stock market. However, a private equity market is difficult to develop not only due to the high risk characteristics of the market but also because of the needs to establish value added infrastructure and to change the current financial mechanisms as the capital market evolves. The government plays one of the most important roles in initiating a new type of capital market, the private equity market. Significant changes and evolution in the development of private equity markets are typically preceded by changes in the regulatory system (deregulation), tax structure, monetary policy, government policy, and/or pension fund operations. Different starting points lead to different paths of market development. However, many countries have tried to introduce private equity markets with various degrees of success. These attempts highlight the fact that different schemes of private equity market structure are necessary for each country. They will, however, converge into one economic model with efficient and effective resource allocation system in the long run. This thesis analyzes the development history, development strategy, and current situation of the private equity industry in Korea and compares it to