This paper evaluates the principal role of a stock market in allocating resources in an emerging economy by testing whether new equities are issued to finance new investments or to recapitalize existing investments. Using a sample of 900 follow-on primary common stock offerings made by Korean publicly traded firms during 2000 to 2007, we find that half of the proceeds are raised through private placements made to creditor banks through debt-equity swaps. We also find that equity issuing firms are generally in bad financial conditions, more likely to replace existing debt with the proceeds raised and get delisted subsequent to the issue regardless of the offer type, except for rights offerings which account for only a small fraction. These findings are hard to reconcile with the traditional theories of capital structure, and suggest that the key role of new equities may be to recapitalize the existing investments or facilitate changes in control rather than finance new investments.