This research investigated whether the KOSDAQ market has played a positive role in financing the growth of Korean economy. The paper, thus, reviews literature to compare the respective advantages of both KOSDAQ‐market financing and bank financing. Next, it conducts regression analysis of the revised Atje–Jovanovic model to investigate whose role in the growth of Korean economy, including venture business, has been most efficient among those of the tripartite: bank intermediation, securities-market intermediation (SEC); and Korean securities-market intermediation (SEC + KOSDAQ-market intermediation). The results show that both roles of securities‐market intermediation (SEC) and Korean securities-market intermediation (SEC + KOSDAQ-market intermediation) have been positive, compared to the negative role of bank intermediation, and that Korean securities-market intermediation (SEC + KOSDAQ-market intermediation) has been most positive. They also show that the positive roles have been fortified in the wake of Korea’s 1997 financial crisis, indebted to the positive roles of stock- and the KOSDAQ-market intermediation. Thus, the paper concludes that KOSDAQ‐market has played as positive a role in supporting the growth of the Korean economy, including the venture business, as that of the securities market.

The results also suggest a policy implication that market-based financial system would be preferable as the future Korean financial system.