Korea Capital Market Institute

This report examines the use, characteristics, and information value of management earnings guidance issued by Korean listed firms from 2002 to 2025. Management guidance can serve as an important information channel by directly conveying managers’ expectations about future performance to the market, thereby reducing information asymmetry and helping investors form expectations. However, the use of management guidance by Korean listed firms has declined since the mid-2000s, with substantial variation across industries. Guidance is concentrated on key financial performance measures such as sales and operating income and is overwhelmingly provided as single-point estimates, while the use of range forecasts remains very limited. In addition, the assumptions underlying these forecasts are often presented in boilerplate language, highlighting the need to promote not only the use of earnings guidance but also greater specificity and reliability in the information disclosed. The analysis of information quality shows that operating income guidance is associated with larger forecast errors and greater optimistic bias than sales guidance. Nevertheless, management guidance conveys forward-looking information that differs from prior market expectations, and such information is incorporated into market prices in stages, from the guidance announcement through the subsequent release of actual earnings. More accurate guidance is also associated with smaller remaining price adjustments at the earnings announcement, while revised guidance appears to serve as a mechanism for incorporating information that becomes available after the initial forecast. Taken together, these findings suggest that management guidance serves as a valuable channel of voluntary disclosure, enabling firms to communicate information about future performance in advance and helping investors update their expectations. Accordingly, policy should focus not simply on increasing the number of guidance disclosures, but on strengthening firms’ incentives to provide forward-looking information voluntarily on a reasonable basis while improving information quality and investor protection. This could include making the scope and conditions of safe-harbor protection more predictable, encouraging firms to disclose the key assumptions and risk factors underlying their forecasts, and treating revisions as part of a reasonable information-updating process. It would also be desirable to encourage greater use of range forecasts to better reflect uncertainty about future performance and to strengthen consistency in disclosure practices and ex post explanations of material differences between forecasts and realized results, thereby enhancing the consistency, comparability, and credibility of management guidance.

This study examines the structure and performance of Korea's impact investing market and identifies the institutional and policy measures needed to strengthen the country's impact investing ecosystem. The analysis draws on two bodies of evidence: an empirical study of venture capital fund data registered in the DIVA (Disclosure of Venture Investment Accounts) system between 2002 and 2024, and a survey and in-depth interviews conducted with 22 domestic impact investment institutions. By headline measures, the market has grown rapidly. Assets under management (AUM) of domestic funds oriented toward impact investing expanded from roughly KRW 30 billion in 2002 to some KRW 6.6 trillion in 2024, and now account for an estimated 12 percent of the venture capital fund market as a whole. This suggests that impact investing is no longer a peripheral or experimental activity and is approaching the threshold at which it could become a meaningful pillar of Korea's capital market. Rapid growth in volume, however, has not resolved the structural constraints that stand between the market and a genuine take-off. Capital supply is limited in both scale and diversity. Frameworks for defining and measuring impact remain underdeveloped. The exit market has been slow to mature, leaving the investment cycle unable to turn over smoothly. Institutional barriers, meanwhile, continue to keep capital providers with considerable potential, such as public-interest corporations, pension funds, and insurers, largely out of the market. The empirical results show that funds carrying impact or quasi-impact designations set lower hurdle rates of return than conventional funds, and that the gap widens among general partners (GPs) with a demonstrated record of managing impact funds. This pattern is consistent with an investment orientation that weighs social and environmental outcomes alongside financial return and carries that orientation through into the terms of the fund agreement. Among liquidated funds, by contrast, performance multiples did not differ significantly between impact-related and conventional funds. Within the sample and scope of this study, then, there is no statistical basis for concluding that impact-related funds realize weaker financial returns than their conventional counterparts. The survey and interviews brought the market's practical difficulties into sharper relief. Public capital, many respondents observed, has been instrumental in forming and growing the market, but private limited partners (LPs) and long-term patient capital have yet to follow in sufficient volume. Respondents pointed consistently to a concentration of investment in early- and venture-stage equity, which leaves a shortage of follow-on capital at the growth stage, and to poorly functioning exit channels, particularly IPOs and M&A. The need for impact measurement and management drew broad agreement, yet practitioners reported that shortages of standardized indicators and data, specialist staff, budget, and external verification make it difficult to evidence outcomes objectively or to feed them into investment decisions. Participants accordingly called for larger inflows of private long-term capital, wider use of blended finance combining public and private participation, and a broader set of funding instruments extending beyond equity to loans and guarantees. Building market confidence, they added, will require the parallel development of impact measurement and verification arrangements that practitioners can realistically use. Moving the market into a stage of substantive growth will require deliberate policy support. Three tasks stand out: enlarging existing policy finance instruments and operating them more flexibly, creating the policy and regulatory conditions that encourage private investment, and supporting the infrastructure on which impact investing depends. Policy finance needs to be reorganized so as to scale up policy funds dedicated to impact investing, strengthen and diversify the exit market, and widen the range of funding instruments beyond equity to include loans and guarantees. To draw in private capital, blended finance can be used to lower investment risk and raise returns for private investors, tax incentives for impact investing can be extended, and regulations constraining impact investing by public-interest corporations and ordinary for-profit companies can be eased. As for infrastructure, rather than having the government build a single uniform system from the top down, policy should encourage a multi-layer system in which the varied approaches now emerging in the private sector coexist while being brought into alignment, thereby making the fullest possible use of private-sector creativity and diversity.

The performance of private credit funds hinges on the debt-service capacity of the middle-market firms held in their portfolios. Yet even as rising interest rates have sharply increased these firms' interest burdens, their profitability has been deteriorating rapidly—pulling in precisely the opposite direction. This has fueled considerable concern over declines in the net asset value (NAV) of private credit funds, and the recent surge in redemption requests reflects precisely these concerns. Despite the erosion of fund value, the likelihood of outright fund default is low, as the leverage ratios of private credit funds are not generally regarded as excessive. Moreover, the possibility that funds could face a liquidity crisis—even amid a sharp rise in redemption requests—is effectively precluded, since funds retain the option to impose redemption limits (gating) or even suspend redemptions altogether. Given this low probability of fund-level default and liquidity crisis, together with the market's modest size, the prevailing view holds that private credit poses little cause for concern as a source of systemic risk. However, once dual borrowers—firms that borrow from both funds and banks—and life insurers' disguised private credit exposures are taken into account, the true size of the private credit market appears to exceed conventional estimates by a wide margin.   A more critical issue is the high degree of interconnectedness. Banks are tightly linked to the private credit market through the provision of credit lines and through synthetic risk transfers (SRTs). Life insurers—particularly those owned by private equity—constitute the sector most closely tied to private credit. As a result, any deterioration in the debt-service capacity of private credit borrowers could translate directly into impaired soundness across the life insurance sector as a whole.   The private credit market does not exist in isolation as a self-contained ecosystem. The complexity of the network that private credit funds have built together with other financial sectors is assessed to be greater than at any point in the past. Focusing narrowly on the private credit market in isolation risks overlooking the broader picture of the financial system as a whole—a pitfall that must be guarded against.

As the number of products and services using distributed ledger technology (DLT)-based tokenization has gradually grown, tokenization has become a major focus for financial institutions and policymakers. In global capital markets, tokenization has moved beyond proof-of-concept and pilot stages and is being applied to the transactions and operations of regulated financial institutions, with a growing body of practical use cases. To date, tokenization has focused primarily on traditional financial products with established regulatory frameworks and market practices, with adoption progressing selectively in areas where the benefits are relatively clear. Financial market infrastructure institutions are also becoming more involved, reflecting the need for an institutional framework that supports tokenization, including legal certainty and operational responsibilities, as well as trusted operators. Major use cases in global markets include collateral management and repurchase agreement (repo) transactions, fund operations and administration centered on tokenized money market funds (MMFs), and bond issuance and settlement—areas where tokenization can substantially improve the efficiency of existing processes. More recently, digital asset platforms have begun issuing equity-linked tokens, while major U.S. exchanges have pursued initiatives to tokenize listed equities. For now, however, given the stringent requirements for investor protection and system stability, progress in this area is expected to be more gradual than in the other areas discussed above. Korea is also preparing to adopt tokenization, including by establishing a legal foundation for the issuance and trading of tokenized securities. Institutional and policy efforts are needed to ensure that tokenization can enhance the efficiency and competitiveness of Korea’s capital markets. Taking into account the risks associated with tokenization and domestic market conditions, adoption should proceed in stages, beginning with areas where tangible benefits can be demonstrated. To this end, regulatory clarity for tokenization projects should be enhanced, and pilot programs should be pursued in areas with strong potential for practical use, such as the tokenization of government bonds. Alongside these efforts, market infrastructure and settlement systems that support tokenization should be developed to foster a tokenization ecosystem that connects reliably with existing capital markets.

In December 2024, Korea entered a super-aged society, with the share of the population aged 65 and over exceeding 20 percent. As the country moves decisively into an era of a demographic onus characterized by a shrinking working-age population, it is becoming increasingly difficult to secure adequate retirement income through public pensions alone, which were designed on the premise of intergenerational support. Despite the recent parametric reform, the National Pension Scheme continues to face long-term fiscal constraints, and its income replacement rate remains well below the 60–70 percent level recommended by international organizations. Korea must therefore strengthen its retirement income security system through a multi-pillar pension framework in which the Basic Pension, National Pension, retirement pensions, and personal pensions complement one another. Against this backdrop, this report emphasizes that the retirement pension system should be repositioned as a core pillar of Korea’s multi-pillar retirement income system. At the end of 2025, total retirement pension assets amounted to KRW 501.4 trillion, nearly doubling from KRW 255.5 trillion at the end of 2020 in just five years. The expansion in asset size alone, however, cannot be regarded as evidence that the system’s retirement income security function has strengthened accordingly. As much as 75.4 percent of total assets remain concentrated in principal-and-interest-guaranteed products, the average annual return over the past ten years stands at only 2.64 percent, and the share of retirement benefits taken in pension form is merely 16.5 percent. Given inflation and the need to finance living expenses over a prolonged period after retirement, it is impossible to accumulate pension assets of sufficient scale through a savings-oriented approach centered on principal-and-interest-guaranteed products. The investment paradigm for retirement pension assets must therefore shift from saving to long-term investment. Pension assets should pursue an appropriate risk premium through globally diversified portfolios. The overall annual return of 6.5 percent recorded by retirement pensions in 2025 was driven by the exceptional 16.8 percent performance of market-linked products, while principal-and-interest-guaranteed products returned only 3.1 percent over the same period. Although these figures partly reflect the recent strength of capital markets and should therefore be interpreted as short-term performance, it remains clear that principal-and-interest-guaranteed products cannot serve as the primary long-term investment vehicle for retirement pension assets. As the direction for reforming the retirement pension system, this report proposes both the introduction of a fund-based governance structure and improvements in the operational efficiency of the existing contract-based retirement pension system. A fund-based system is not simply a mechanism for pooling assets to increase investment scale. Rather, it represents a reform of governance designed to ensure that professional asset management, effective management of conflicts of interest, and long-term performance evaluation operate through an independent decision-making body representing the interests of workers and through clearly defined fiduciary responsibilities. The principles developed by the OECD and IOPS, together with the experience of master trusts in the United Kingdom and superannuation in Australia, demonstrate that institutional independence, professional expertise, transparent disclosure and supervision, and meaningful competition among funds are critical determinants of success. The 2026 tripartite declaration by labor, management, and government proposed three types of retirement pension funds: nonprofit association-type funds, financial-institution open-type funds, and public-type funds. This report emphasizes that these models should not be regarded as mutually competing alternatives; rather, they are complementary arrangements designed to serve different institutional objectives. The purpose of nonprofit association-type funds is to enable enterprises with similar characteristics to form sustainable alliances and extend their retirement pension arrangements through to the payment of benefits. Association-type funds established by corporations are intended to provide competitive employee benefit arrangements that can help attract and retain high-quality personnel. Financial-institution open-type funds, by contrast, are intended to improve investment returns through the asset-management infrastructure of private financial institutions and active competition in investment performance. Governance and supervisory arrangements should be designed so that these distinct institutional objectives can be fully realized. Public-type funds are intended to close coverage gaps among small and micro enterprises and vulnerable workers and to secure stable benefit entitlements. From this perspective, participation by the National Pension Service (NPS) in the public-type retirement pension market would be inappropriate. The high investment returns and low operating costs cited by the NPS as its competitive strengths are unlikely, in the context of retirement pension management, to generate a meaningful advantage over Pureun Seed, the existing public-type fund operated by the Korea Workers’ Compensation & Welfare Service. From the standpoint of public-sector intervention in a private financial market, the potential benefits are uncertain, whereas the adverse effects are much more evident. Moreover, from the perspective of risk diversification within a multi-pillar pension system, it is undesirable to place the management of public and private pension assets in the same institutional basket. The introduction of a fund-based system alone will not resolve all of the current problems. The operational efficiency of contract-based retirement pension arrangements, which are likely to coexist with fund-based arrangements for a considerable period, must also be improved. In defined benefit (DB) plans, stronger incentives are needed to ensure that investment management committees and Investment Policy Statements (IPSs) operate in a substantive rather than merely formal manner. Discretionary investment management through an Outsourced Chief Investment Officer (OCIO) arrangement should be permitted for DB pension assets, thereby enabling the establishment of an asset-liability management (ALM)-based asset allocation framework that takes account of wage growth and the structure of pension liabilities. In defined contribution (DC) plans, the highest priority should be to enhance the effectiveness of the pre-designated investment method, or default option system. Although assets under default options have grown to KRW 53.3 trillion, 85.4 percent are concentrated in conservative options, resulting in an overall return of only 3.69 percent. The very purpose of a default option system is to prevent participants’ inertia from leaving pension assets stranded in low-return products. The current opt-in structure, however, under which participants must once again actively select an investment product, imposes significant limitations on the effectiveness of the system. The pre-designated investment regime should therefore be restructured into a genuinely automatic investment framework centered on target-date funds (TDFs) and target-risk funds (TRFs). These reforms will also require a fundamental transformation in the role of financial institutions. The retirement pension market of the future should evolve away from competition based primarily on asset size and product sales toward competition in asset allocation, risk management, and investment performance. Financial institutions should no longer function merely as product providers; they should be transformed into fiduciary institutions bearing substantive responsibility for the management of pension assets. The ultimate objective of retirement pension reform is to establish a system in which accumulated retirement assets are converted into stable pension benefits through the professional expertise of financial institutions and the rigorous discharge of their fiduciary responsibilities.

The Korean economy is facing structural challenges characterized by a slowdown in total factor productivity (TFP) growth and a persistent decline in its potential growth rate. As population aging deepens and the marginal productivity of capital declines, growth driven by the expansion of factor inputs is becoming increasingly constrained. At the same time, the deceleration in TFP growth has emerged as a major impediment to sustainable economic growth. Enhancing TFP requires not only technological progress but also efficient allocation of production factors across firms—that is, allocative efficiency plays a critical role. Meanwhile, the global economy is undergoing a rapid transition from a production structure centered on tangible assets such as plants and equipment toward one increasingly driven by intangible assets, including knowledge, know-how, and organizational capabilities. Although intangible assets have become a key source of firm competitiveness and growth, firms with greater reliance on intangible assets are more likely to face external financing constraints due to valuation uncertainty and the limited collateralizability of such assets. These financial constraints can hinder the expansion of highly productive firms and, in turn, lead to inefficient allocation of resources. Using financial statement data for audited Korean firms, this study estimates and aggregates firm-level stocks of intangible capital. The results indicate that the share of intangible capital in total corporate capital stock increased substantially from 23.1 percent in 1999 to 36.6 percent in 2023. In particular, industries that are more intensive in intangible assets experienced a faster pace of “intangible deepening” than other industries, and their share of total value added in the corporate sector has risen markedly in recent years. This study develops a misallocation framework that explicitly incorporates intangible capital as a production factor, alongside tangible capital and labor, and examines trends in allocative efficiency and the underlying sources of inefficiency in the Korean corporate sector. The main findings can be summarized as follows. First, reallocation gains—measured as the increase in aggregate TFP and value added that would result from eliminating misallocation—have risen substantially over the past two decades, indicating a broad deterioration in allocative efficiency across the corporate sector. This decline in allocative efficiency is estimated to have reduced Korea’s TFP growth and overall economic growth by approximately 0.7 percentage points per year during the period from 2003 to 2023. Second, the deterioration in allocative efficiency is largely attributable to a combination of worsening inefficiencies within intangible-intensive industries and structural changes in the economy reflected in the rising economic weight of these industries. Third, misallocation within intangible-intensive industries is driven primarily by the under-allocation of resources to firms with high marginal productivity. This pattern is particularly pronounced among young firms and unlisted firms, suggesting that structural financial constraints—stemming from limited collateral value of intangible assets and information asymmetries—are impeding the growth of highly productive intangible-intensive firms. The findings of this study suggest that easing growth constraints faced by intangible-intensive firms and improving allocative efficiency constitute a key policy challenge for enhancing Korea’s growth potential. To this end, several policy efforts are warranted. First, the capacity of the financial system to supply funding to intangible-based firms should be strengthened. Intangible-intensive firms—especially young and unlisted firms—are structurally disadvantaged under traditional financial systems that rely heavily on tangible collateral. Expanding the role of specialized investors and financial intermediaries capable of assessing the growth potential and innovative capacity of intangible-based firms, together with strengthening IP-based finance, would help alleviate financing gaps and growth constraints for these firms. Second, information asymmetries should be mitigated through improvements in disclosure regimes related to intangible assets. Given that information asymmetry, alongside limited collateral, is a key driver of financial constraints for intangible-intensive firms, continued efforts to refine accounting standards so that financial information better reflects the economic substance of such firms are essential. In addition, strengthening the disclosure of IP-related non-financial information should be actively considered.