The South Korean government launched its “Corporate Value-Up Plan” around three months ago. However, the core aspect of this policy, which involves companies voluntarily disclosing their strategies to enhance corporate value, has seen a participation rate of only 0.3%.
The Corporate Value-Up Plan is a government initiative designed to encourage publicly listed companies in South Korea to adopt strategies that enhance their market value and increase shareholder returns. The plan urges companies to improve transparency, buy back shares, retire shares to reduce the number of outstanding stocks, and implement long-term growth and profitability strategies.
However, despite increasing shareholder returns through actions like buying back and retiring more shares than last year, companies are still hesitant to participate in these value-up disclosures. Many analysts believe this cautious stance is due to difficult economic conditions and concerns that the plan’s success could be undermined by resistance from the main opposition party, especially regarding the approval of key tax incentives that are considered crucial for the plan’s effectiveness.
According to the Korea Exchange (KRX), as of Aug. 19, there are 2,587 listed companies in S. Korea, 844 on the KOSPI and 1,743 on the KOSDAQ, the two major stock markets in the nation.
Of these, only seven companies have voluntarily disclosed their value-up plans, including Kiwoom Securities, FnGuide, Kolmar Holdings, Meritz Financial Group, Woori Financial Group, Shinhan Financial Group, and DB HiTek.
Although financial authorities unveiled the Corporate Value-Up Plan at the beginning of the year and officially launched the voluntary disclosure process on May 27, nearly three months later, the participation rate is still only at 0.3%. Even when including the eight companies that have announced their intention to participate in the future, the rate only rises to 0.6%.
In response to the low participation rate, high-ranking government officials have been consistently urging companies to get involved.
On Aug. 8, Lee Bok-hyun, the head of the Financial Supervisory Service, made a public appeal, asking CEOs and major shareholders of listed companies to actively participate in the value-up disclosures led by the Korea Exchange.
Just four days later, on Aug. 12, Kim Byung-hwan, the chairman of the Financial Services Commission, reiterated that the success of the Corporate Value-Up Plan depends on the voluntary and proactive participation of market players, once again urging more companies to take part.
However, many listed companies remain reluctant, and even the initial announcements of intended participation have been mostly overlooked.
In contrast, Japan, whose value-up program served as a model for S. Korea’s initiative, saw over 10% of listed companies participate within the first four months of its implementation. This has led to criticism that S. Korea’s version of the program is struggling to gain traction in its early stages.
However, it’s not that companies lack the will to engage in shareholder-friendly management. In fact, the number of stock buybacks in S. Korea is on the rise.
According to the Korea Exchange, stock buybacks by listed companies in S. Korea during the first half of this year reached 2.2 trillion won ($1.6 billion), a 22% increase compared to $1.3 billion during the same period last year.
Additionally, company stock retirements have nearly reached $6.7 billion as of August, compared to about $1.4 billion during the same period last year. When companies buy back and retire shares, the number of shares in circulation decreases, thereby increasing the value per share.
However, companies are not rushing into the value-up disclosures, as they are cautious due to challenging macroeconomic conditions, including concerns over a potential recession originating from the U.S.
A representative from one listed company mentioned that, since the value-up plan is a medium- to long-term strategy, they are carefully discussing it with their board of directors. The representative added that many companies might announce their value-up plans around the fourth quarter when they finalize their business plans for the following year.
Another factor hindering active participation is the concern that the key tax incentives, crucial to the success of the value-up policy, might be blocked by the major opposition party, potentially derailing the initiative.
