The Korea Local Administration Review

This article employs a variable-oriented statistical method to analyze, from an institutional economics point of view, the influence of financial liberalization policy on the institutionalization of the capital market. The relationship between the following variables are analyzed: financial liberalization policy as the independent variable, property right changes (capitalization rate) and transaction cost changes (turnover ratio of market value) as mediating variables, and institutionalization(from circulation to issuance of securities) of the capital market  as the dependent variable. The analysis finds that financial liberalization policy contributes more to the rise in turnover ratio of market value (or reduction in transaction costs) than capitalization rate, and the turnover ratio of market value has a larger impact on the primary market. This shows that the policy to liberalize the financial market implemented in the turning point of 1997 greatly affects the institutionalization of the capital market.