The Asian financial crisis of 1997-98 was a major setback for Korea, one of the world’s most successful economies in the post-war era. Nevertheless, the financial crisis has led to some positive changes in Korea’s financial system. The Korean government, in conjunction with the IMF, is carrying out comprehensive structural reforms in the financial system. In the meantime, online stock trading has grown explosively since 1998 to the extent that Korea now has the world’s highest penetration rate in this area.
In our paper, we analyze the fundamental factors driving the rapid growth of online stock trading in Korea. We then examine the implications of such growth on the competitive environment of Korea’s retail brokerage industry as well as the liquidity, volatility, cost structure and efficiency of the stock market. We also look at the relationship between financial reform and online trading. In addition to exploring possible changes in the value propositions of brokerage firms, we also examine new regulatory issues that have emerged in line with the rapid growth of online trading. In short, our main objective is to study the causes and effects of Korea’s online trading boom.
PARK, Donghyun; Koh, Teck Huat; Lin, Song; Nguyen, Quang Huy; and Soegiarto, Fany, "Korea's Online Stock Trading Boom: Facts and Implications" (2001). ICEB 2001 Proceedings. 57.