There is much debate in both developed and developing countries about what kinds of financial institutions and markets best serve economic growth. To what extent can the superior performance of Japanese and German economies be attributed to their market-based system (with a focus on short-term gains)? Prominent in current debates about the competitiveness of industrial nations are issues of corporate financial structure and financial market organization. Drawing on recent experiences in India and Korea, the authors consider key issues that arise in connection with the development of equity markets in developing countries. Under what conditions does it make sense to encourage the development of equity markets? Is a functioning equity market a prerequisite for the liberalization of the banking system? Is it useful to think in terms of an optimal debt/equity mix for a developing economy, or for a corporation in a developing economy? What is the appropriate regulatory regime for a developing country's securities market? Without effective regulation, international investors will not have the confidence to commit the resources to developing country markets. Good managment skills are scarce in developing countries. How can matters be arranged to make optimal use of those resources? The stock market's role in effecting changes in corporate governance could be enormously helpful to economic development.