"KOSPI Listed Companies' Shareholder Return Rate Only 26.7%... One-Third of US Level"

Concerns have been raised that the shareholder return rate of KOSPI-listed companies is only about one-third of that of companies listed in the U.S. 'Standard & Poor's (S&P) 500' index.

According to KCGI Asset Management on the 13th, at a governance seminar held the previous day, Kim Gyusik, chairman of the Korea Corporate Governance Forum, stated, "The shareholder return rate of domestic companies is one-third of the U.S. S&P market and one-quarter of the Japanese Nikkei 225 market," adding, "Active shareholder activism by asset management firms and others is necessary."

As of the end of last year, the combined shareholder return rate of the KOSPI market was 26.7%.

This figure is significantly lower compared to Taiwan's TAIEX (49.6%), the U.S. S&P (84.3%), and Japan's Nikkei 225 (108.5%).

The price-to-book ratio (PBR) of KOSPI companies averaged 0.90%, also lower than Taiwan's TAIEX (1.85%), the U.S. S&P (3.81%), and Japan's Nikkei 225 (1.55%). This indicates that stock prices are undervalued relative to asset value.

Myung Jaeyup, head of equity management at KCGI Asset Management, explained, "Recently, in Japan, stock exchanges have been increasingly demanding listed companies with a PBR below 1 to identify causes of undervaluation and propose improvement measures, reflecting a policy-driven push for governance improvement," adding, "Domestically, government policies or exchange guidelines may follow Japan's precedent."

He also noted, "This year, shareholder proposals passed at domestic annual general meetings have increased by 78% compared to the previous year, indicating growing activism," and emphasized, "The emergence of funds advocating active shareholder activism is necessary to enhance the corporate value of domestic companies."

There was also an argument that improving corporate governance leads to enhanced corporate value.

The market capitalization of Samsung Electronics and U.S. Apple was ?544 trillion and ?2,641 trillion respectively at the end of 2020, but recently the figures have diverged to ?464 trillion and ?3,800 trillion.

Professor Lee Namwoo of Yonsei University explained, "This change is due not only to Apple's long-term growth potential but also to improved evaluations in terms of governance."

He added, "Domestically, there is a tendency to mistakenly believe that governance is stable when a major shareholder holds a large stake," emphasizing, "Corporate governance starts with preventing the expropriation of minority shareholders by major shareholders and promoting the company's long-term growth."

Furthermore, he said, "Effective corporate governance provides trust to companies, markets, and the overall economy, which will, in the long term, resolve stock market undervaluation and lead to increased shareholder value and stock price appreciation."

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