Tightened Chaebol Regulations... Non-Chaebol Companies Show More Lucrative Stock Returns

Non-Conglomerate Companies' Stock Returns at 358.42% Over the Past 9 Years
Conglomerate Companies Lag Behind at 113.44%

[Asia Economy Reporter Ji Yeon-jin] It has been analyzed that over the past nine years, non-chaebol companies in the domestic stock market have recorded higher returns than chaebol companies.

On the 10th, according to an analysis by Cape Investment & Securities on whether there is a difference between chaebol and non-chaebol companies in terms of stock price returns, since the 2010s, the non-chaebol company portfolio has shown better performance.

In the KOSPI market, from 2013 to 2021, the cumulative return over the recent nine years was 92.31% for the chaebol company portfolio, while the non-chaebol company portfolio reached 271.64%.

During this period, in the KOSDAQ market as well, the cumulative return of the non-chaebol company portfolio was 396.81%, surpassing the chaebol company portfolio (216.21%). The cumulative return of KOSDAQ during this period was 126.84%.

Including the entire KOSPI and KOSDAQ markets, the cumulative returns were 113.44% for chaebol companies and 358.42% for non-chaebol companies, with non-chaebol companies overwhelmingly higher.

However, before 2011, the return spread (L-S spread) between the non-chaebol company portfolio and the chaebol company portfolio showed an average relative return ratio of 0.4914, indicating that non-chaebol companies had 51% lower performance. After 2011, the average relative return ratio showed non-chaebol companies outperforming by 31%.

This is analyzed to be the effect of the introduction of regulations in the 2010s, such as the prohibition of corporate opportunity abuse under the Commercial Act, the prohibition of private interest exploitation under the Fair Trade Act, and the deemed gift regulations related to internal transactions and transfer pricing.

Son Joo-seop, a researcher at Cape Investment & Securities, stated, "Risk sharing and mutual support within corporate groups appear to have negatively impacted the overall performance of affiliates, resulting in a decrease in the portfolio returns of chaebol companies."

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