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보고서 1
Analysis of Securities-based Crowdfunding Markets in Korea [19-02]
Research Fellow Park, Hyejin and others / Jan. 21, 2019
This paper studies the characteristics of Korean securities-based crowdfunding markets and the behaviors of investors during the crowdfunding campaigns, thereby providing policy implications as to improve the current system. Securities-based crowdfunding is a new financing method for startups that are too small to be funded by angel or venture capital and financing from their friends and family are not enough to cover their financing needs. Besides, securities-based crowdfunding has other benefits. For example, professional investors such as angels and venture capitalists can use the crowdfunding outcome to predict the future of demand of the goods or assess the future returns of their investement projects. 

First, we review the concept of securities-based crowdfunding and its relations to other venture investors, and then discuss some features of main participants of securities-based crowdfunding markets such as entrepreneurs (issuers), individual investors, and platforms. Majority of issuers that attempt to raise capital via crowdfunding are early ventures, but some of them tend to be more suited to crowdfunding than others. For example, very high-tech firms whose business models are based on complex technology are less likely to be a good fit since unexperienced individual investors without knowledge in that area may be hesitant to commit their money to that venture’s project. In terms of crowdfunders, we focus on their investment behavior during crowdfunding campaign. We observe herding behaviour of the investors in the early days of funding windows, implying that the early performance has significant effects on the final funding results. Regarding platforms we overview the crowdfunding process operated by these platforms and compare their business models.

Next, we investigate the role of signals about hidden quality of the project and campaign-related information on funding success and investors’ decisions to commit financing. Our results show that backing by professional investors,  funding target, and campaign duration play a significant role for the funding outcome. However, we also find that hard information about the issuer’s ability such as performance in the past crowdfunding campaigns, certification as social company or venture firms have little or not impact on the funding outcome. Furthermore, we find that backing by professional investors have the opposite effects on funding success and the other small investors’ participation in crowdfunding; receiving more funding from professional investors contributes to funding success but it might decrease the chances that other small investors participate in that project. Finally, we discuss the policy implications of these results.
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보고서 1
Facilitating shareholder engagement in Korea [18-03]
Senior Research Fellow Song, Hong Sun / Feb. 21, 2018
Since the adoption of the Stewardship Code, the question has been raised as to how much Korean Stewardship Code facilitates shareholder engagement. And what else shall we prepare more for skilled and experienced corporate engagement by institutional shareholders, along with the adoption of Stewardship Code? Given these questions, this study examines the evolving history and current status of shareholder engagement by overseas global institutional investor, and hence endeavors to draw some lessons and tasks for Korean institutional investor and policy-makers to activate corporate engagement in Korea. 
Learning from experiences or relevant laws and regulations in other countries, Korea has a long way to go in terms of  corporate engagement by institutional shareholders. The pressing challenges facing the country are the lack of investor experience in shareholder engagement, the inflexibility of relevant laws and regulations, and the lack of infrastructure, which ensures impartiality as well as expertise and knowledge. The stewardship code embraces shareholder engagement through company-friendly, informal and private measures such as letters, private dialogues with the board of directors or management, and shareholder proposal. Unfortunately, however, such kinds of shareholder rights have never been used by any Korean institutional investor, even the world-largest National Pension Fund.
We find the large gap in engagement experience between domestic investors and overseas institutional investors. Public pension funds such as CalPERS have gained their engagement experience through informal private dialogues and shareholder coalitions, rather than formal shareholder proposals. Private pension funds including TIAA have been more active in making shareholder proposals in collaboration with labor unions, instead of relying on private dialogue. Mutual funds, which are said to take a rather passive approach to exercising their shareholder rights, have actively engaged with investee companies by supporting pension funds’ shareholder engagement or working with them since the global financial crisis. In terms of subject matters that shareholder proposals deal with, public pension funds and defined benefit (DB) pensions have superior experience and know-how on social or environmental issues, mutual funds on corporate governance matters, and hedge funds on financial or management strategies.
Based on findings from these case studies, this report makes some recommendations. First, Korean institutional investors should endeavor to build their own philosophies, strategies and know-how of the engagement. The mutually beneficial exercise of shareholder rights definitely requires them to have their own philosophies, strategies and know-how. The collaboration with foreign shareholders including CalPERS could be a good strategy to build it. It will be the chance to share and learn their relevant philosophies, strategies and know-how. 
Second, The shareholder proposal regime plays a critical role in making various means of constructive shareholder engagement more effective. It is required to improve the relevant legal and regulatory frameworks in order to ensure the variety in the subject of proposals including the ESG subject. Another area for improvement is the legal nature of shareholder proposals. The key lies in whether shareholder resolutions are binding or precatory (non-binding) on the company and its management. What is at issue is which regime is more desirable and useful in facilitating the exercise of shareholder rights and enhancing the effectiveness of shareholder rights as a tool for market discipline. A study shows that despite the same legal tradition shared by the US and UK, precatory shareholder engagement in the US is far more active than binding one in the UK.
Third, Proxy advisory firms should be subject to more stringent regulation on their business. Many institutional investors in Korea are also highly likely to use proxy advisory firms while they implement the stewardship code. To ensure that proxy advisers have their relevant expertise and independence, they should be regulated as investment advisers given the nature of their business. As regards non-profit advisory firms that cannot be registered as investment advisers due to their economic nature, the constructive application of the investment adviser regulation, as in the US, is worth considering. What is more, the problem of fairness or independence can arise from their corporate governance attributes. This warrants a different regulatory approach to nonprofit proxy advisers, for example, by establishing an independent committee to deliberate on voting recommendations.

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