"22-Year-Old Korea Discount: Insufficient Shareholder Returns and Governance Issues"

Financial Services Commission Holds 'Policy Seminar to Resolve Korea Discount' with Exchanges and Capital Market Institute
Domestic Listed Companies' PBR Only 52% Compared to Advanced Countries
Insufficient Shareholder Returns, Low Profitability and Growth, and Weak Corporate Governance Are Causes

[Image source=Yonhap News]

[Asia Economy Reporter Lee Myunghwan] There are concerns that the 'Korea Discount' phenomenon, where companies listed on the domestic stock market are undervalued compared to overseas listed companies, has not been properly resolved. The causes of the Korea Discount were identified as low shareholder returns, lack of growth potential, and weak corporate governance.

On the morning of the 15th, the Financial Services Commission held a 'Policy Seminar to Resolve the Korea Discount' at the Korea Exchange Conference Hall in Yeouido, Seoul, together with the Korea Exchange and the Korea Capital Market Institute, discussing the causes and solutions of the Korea Discount phenomenon.

Kim Junseok, Senior Research Fellow at the Korea Capital Market Institute, who presented on the topic of 'Analysis of the Causes of the Korea Discount,' pointed out, "The term 'Korea Discount' first appeared in the media in October 2000, making it a 22-year-old expression. It is a very old problem that everyone acknowledges must be solved, yet it remains unresolved."

Researcher Kim further noted that the Korea Discount is real, citing that the price-to-book ratio (PBR) of domestic listed companies is significantly lower compared to overseas listed companies. He stated, "Analyzing data from 32,000 listed companies across 45 countries, the PBR of Korean listed companies is 52% of that of developed countries, 58% of emerging countries, and 69% of Asia-Pacific countries," concluding that "the Korea Discount exists."

The core factors of the Korea Discount were identified as insufficient shareholder returns, low profitability and growth potential, and weak corporate governance. Researcher Kim analyzed that geopolitical risks, which had been suggested as a factor, do not have a significant impact on the Korea Discount. He remarked, "These factors have been pointed out since the Korea Discount was first mentioned. Everyone knows them and many efforts have been made, but the problem remains unresolved."

During the subsequent discussion on the analysis of the causes of the Korea Discount, various opinions were exchanged. Kim Donghwan, CEO of Sampro TV, argued, "While the level of individual investors has improved over the past 3 to 4 years, corporate governance and accounting transparency have not. If companies become more advanced and shareholder-friendly return policies are established as in advanced markets, the Korea Discount will significantly decrease."

Seo Cheolsu, Head of the Research Center at Mirae Asset Securities, said, "With ESG (Environmental, Social, and Governance) becoming a hot topic recently, domestic corporate governance feels lacking compared to global investors, which is regrettable. Shareholder return governance also seems to lack a fully established shareholder-centric capitalism on a broad scale."

Meanwhile, Kim Soyoung, Vice Chairman of the Financial Services Commission, expressed the intention to restore investor trust and reform regulations in her opening remarks. Vice Chairman Kim stated, "The government will swiftly advance national tasks to restore trust in the capital market from investors. We will identify and remove shackles one by one, including regulations unique to Korea that do not exist in developed countries, outdated regulations introduced long ago whose reasons are now hard to find, and rigid regulations that cannot accommodate recent technological changes."

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