"Over 100 Delisted Risk Management Stocks... Largest Since Financial Crisis"

KOSPI 9, KOSDAQ 95, Total 104 Stocks
Highest Level Since April 2009 Global Financial Crisis

[Asia Economy Reporter Oh Ju-yeon] The number of domestically listed companies designated as management items has exceeded 100. This is the highest level since April 2009, when the global financial crisis had an impact.

In particular, many companies in the KOSDAQ market were designated as management items due to operating losses and capital erosion. Those designated as management items due to adverse audit opinions were mainly because of poor performance, indicating that the fundamental strength of listed companies has weakened accordingly.

On the 21st, Asia Economy requested data from the Korea Exchange and compiled the daily number of management items over the past 15 years since 2005. As of the 18th, among domestic listed companies, 9 were designated as management items in the KOSPI market and 95 in the KOSDAQ market, totaling 104. At the end of last year, there were 93, and in mid-February, about 92, but the number increased by 12 in the last three months. On the 5th of last month, it even rose to 109. This is the highest level since April 1, 2009, when management items increased to 143 amid difficulties caused by the global financial crisis.

Management items have shown a clear increasing trend over the past three years. At the end of 2017, there were 6 in the KOSPI market and 34 in the KOSDAQ market, totaling 40. By the end of 2018, these numbers rose to 9 and 37 respectively, totaling 46, followed by a sharp increase last year. This was largely due to the revision of the listing management system. Last year, the Financial Services Commission reformed the existing system where companies receiving adverse audit opinions such as qualified, adverse, or disclaimer of opinion were immediately subject to delisting, in order to reduce the external audit burden on companies. Even if a company receives an adverse audit opinion, it is not immediately delisted but designated as a management item, and if the company submits an objection, a one-year grace period is granted for management improvement. As a result, companies that would have been delisted remained as management items, significantly increasing their number.

However, the increase this year is pointed out to be related to the deterioration of corporate management. Excluding cases designated as management items due to procedural issues such as failure to submit business reports, many listed companies were included as management items for reasons related to corporate performance.

Looking at companies newly designated or with changed reasons for management item status this year, most were due to "operating losses before tax exceeding 50% of equity in 2 out of the last 3 fiscal years," "operating losses for 4 consecutive fiscal years," or "capital erosion rate exceeding 50%." A Korea Exchange official said, "Analyzing the status of management item designations, it was clear that the domestic economic situation was greatly reflected."

This content was produced with the assistance of AI translation services.