| The first Chapter of this dissertation provides a general perspective on the Korean economy and its evolution after the 1997 financial crisis. Then Chapter 2 analyzes incentives of managers undertaking a project when there is a prospect of bailouts should the project prove to be unsuccessful. After introducing some of the important features of the Korean corporate bankruptcy system, the Chapter discusses accompanying risks of moral hazard of managers. It further explores the complex ownership structure of the chaebol companies and shows how minor shareholders could maintain their control and also how moral hazard would be a more serious problem in that situation.; Chapter 3 focuses on the use of nonvoting preferred shares to maintain control which was popular in Korea in the late 1980s. The model presented in the Chapter analyzes a company proposing its shareholders to convert their shares of common stock into nonvoting shares with dividend preference in return for giving up voting rights. The Chapter shows how insiders are able to consolidate their control and engage in expropriation, without a fear of control contests, by and after inducing outside shareholders to convert their voting shares into non-voting shares.; Chapter 4 analyzes the mechanism of venture capital financing, focusing on the active role the Korean government has been trying to play. After reviewing and comparing experiences in the United States and Korea, the Chapter argues, consistent with the literature on the soft budget constraint, direct involvement of the government in the market for risky investments may result in inefficient investments. With soft budget constraints, even without assuming agency problems of government officials, overall profitability of a project suffers and inefficiency may result. |
