Most Chaebol Heads' Stock Prices Rise During Imprisonment, Outperforming KOSPI

Imprisonment Periods of Major Group Heads like Samsung, Hyundai, SK
Group Affiliates' Stock Prices Outperform KOSPI

[Image source=Yonhap News]

[Asia Economy Reporter Ji Yeon-jin] In most cases where heads of conglomerates were imprisoned in the past, the stock prices of their core companies rose more than the overall market.

According to the Korea Exchange and Infomax on the 24th, among the nine cases since 2000 where heads of major groups such as Samsung, SK, Hyundai Motor, Lotte, Hanwha, CJ, and Orion were imprisoned, in seven cases, the representative stocks of the group's holding companies rose more than the KOSPI during the imprisonment period.

In Samsung's case, from just before Vice Chairman Lee Jae-yong was detained on February 17, 2017, related to the political scandal, until just before his probationary release on February 5, 2018, Samsung Electronics' stock price rose 25.46%, surpassing the KOSPI increase of 21.31%.

For SK, Chairman Chey Tae-won was sentenced to prison for embezzlement and other charges and imprisoned from January 2013 to August 2015, during which SK's stock price surged by 198.56%. At that time, the KOSPI rose only 0.97%.

In Hyundai Motor Group, Honorary Chairman Chung Mong-koo was imprisoned from April to June 2006 on charges of slush fund creation and embezzlement of company funds. During this period, Hyundai Motor's stock price fell 7.70%, but it performed better than the KOSPI (-14.11%).

In Hanwha's case, Chairman Kim Seung-yeon was imprisoned twice after the 2000s: once for a 'retaliatory assault' incident (May to September 2007) and again for improper support of insolvent affiliates (August 2012 to February 2014). During his first and second imprisonment periods, Hanwha's stock price rose 35.51% and 14.08%, respectively, outperforming the KOSPI (+14.76%, -1.72%).

CJ Chairman Lee Jae-hyun was detained in July 2013 on charges including embezzlement and was released in August 2016 under a Liberation Day pardon. During this time, CJ's stock price jumped 76.21%, significantly outperforming the KOSPI (+9.95%).

Orion Chairman Dam Cheol-gon was imprisoned from May 2011 to January 2012 on charges including slush fund creation. During this period, Orion Holdings (then Orion) stock price rose 40.92%, outperforming the KOSPI (-7.05%) by nearly 50 percentage points.

On the other hand, in Lotte's case, Chairman Shin Dong-bin was imprisoned from February to October 2018 due to the political scandal, during which Lotte Holdings' stock price fell 15.23%, underperforming the KOSPI (-4.65%). Also, when SK Chairman Chey Tae-won was first imprisoned for accounting fraud from February to September 2003, SK's stock price rose 16.29%, but it lagged behind the KOSPI (+23.96%).

The total market capitalization of Samsung Group stocks as of the 22nd was 797.2 trillion KRW, an increase of 21.6 trillion KRW from 775.6 trillion KRW on the 18th, the day Vice Chairman Lee Jae-yong was detained. Although Samsung Group's market cap fell by 28 trillion KRW on the 18th due to the impact of Lee's detention, about 77% of the loss was recovered within four days.

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