Chicago Journal of International Law


Our proposal in Korea therefore is to start small. We focus on the possibility of introducing more competition by giving firms greater choice within the existing regulatory regime. As an initial, obtainable goal, we propose taking an approach similar to that pursued by the Brazilian Stock Exchange ("Bovespa") to establish a new voluntary section for firms on the KSE satisfying global corporate governance standards. We also explore a second option to introduce competition by allowing some firms to opt out of domestic regulation in favor of the regulatory regime of a foreign country. Such an approach would allow firms the ability to choose for themselves-within limits-the level of investor protection they desire through a listing on a foreign exchange. Firms with large, entrenched controlling shareholders or managers and a dispersed pool of minority investors will probably not take advantage of the ability to opt into a higher level of corporate governance, because controlling shareholders will not voluntarily forsake their private benefits of control. Moreover, dispersed shareholders already receive compensation for the expected expropriation of private benefits in the form of a discounted share price at purchase. Instead, our suggested reforms will primarily assist newer companies seeking to raise funds from the public capital markets. Indirectly, the creation of a new investor-protection environment with accompanying norms and institutions will impact the rest of Korea's capital markets. In the discussion that follows, part II provides an overview of the potential benefits from protecting minority investors and the empirical evidence of the efficacy of such protection. Part III surveys potential reform options and details our proposal to expand the choices available to companies within the KSE. [CONT]

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