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Korean J Financ Stud > Volume 48(4); 2019 > Article
Korean Journal of Financial Studies 2019;48(4):467-496.
DOI: https://doi.org/10.26845/KJFS.2019.    Published online August 31, 2019.
Does the SME Exchange Properly Function as a “Growth Market”? A Look Through its Correlation with Private-Firm Growth
Hee Jung Choi1, Dong Wook Lee2
1Deputy Research Fellow, National Pension Services - NPRI
2Professor, Korea University
코스닥시장의 “성장시장”으로서의 역할 분석: 코스닥시장 주가와 비상장기업 성장의 상관관계를 중심으로
최희정1, 이동욱2
1국민연금연구원 부연구위원
2고려대학교 교수
Correspondence:  Dong Wook Lee, Tel: +82-2-3290-2820, Fax: +82-2-3290-5394, 
Email: donglee@korea.ac.kr
Received: 12 February 2019   • Revised: 8 June 2019   • Accepted: 5 July 2019
This paper evaluates whether a stock exchange targeted specifically at SMEs, namely, the SME exchange, functions as a “growth market” by capitalizing industry growth opportunities into stock prices. To this end, we examine the correlation between the SME exchange prices?aggregated up to the industry level?and private-firm growth. That is, we use the growth of private firms in an industry as a proxy for industry growth options that the SME exchange prices need to embody. Using data from Korea whose SME exchange is one of the largest in the world, we find that the SME exchange prices are positively correlated with the growth of private firms, especially when they are small in size, they belong to a growing industry, or their growth is funded by equity. In the same regression, the main board stock prices are correlated with the liability-funded growth of large-size private firms in a mature industry. Taken together, our results suggest that the SME exchange plays a positive and complementary role in the economy by embodying the type of industry growth opportunities that are not readily represented by the main board stock prices.
Key Words: SME Exchange, Private Firms, Industry, Growth Opportunities, Korea
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