Accelerate elimination of Korea discount: Financial authorities reform repeated listing regulation

As the KOSPI index breaks through the 7,500-point mark and hits a record high, financial authorities are accelerating efforts to improve the system to eliminate long-standing undervaluation factors in the domestic stock market. The underlying judgment is that, compared to the stock price increase itself, a more important issue is correcting why the market has not been fully recognized by foreign investors and institutional investors. Authorities especially plan to strengthen repeated listing regulations and pressure companies with low price-to-book ratios (PBR: stock price to net assets ratio), laying the foundation to eliminate the so-called “Korean discount.”

One of the core issues is the problem of repeated listings. Previously, large domestic companies often used a method of first splitting off a company and then relisting the subsidiary. During this process, the value of the parent company and the subsidiary was repeatedly counted in the market, leading to distorted overall enterprise valuation and ongoing criticism. In fact, as of November 2025, Korea’s repeated listing rate reached 18.4%, far higher than Japan’s 4.38% and the United States’ 0.35%. The Financial Services Commission and Korea Exchange believe this structure is one of the reasons for the undervaluation of the domestic stock market, and are moving to amend listing regulations toward “generally prohibiting repeated listings, with some exceptions.” In the future, if a parent company wants to list a subsidiary, it must meet standards for operational independence, business independence, and investor protection, with specific criteria to be announced in the first half of 2026.

In this process, the protection mechanism for common shareholders has also become an important focus of discussion. Authorities are simultaneously studying how to define the scope of exceptions allowing subsidiaries to list; how to protect the rights of parent company common shareholders; and how to assign the board of directors a fiduciary duty to shareholders during the subsidiary listing process. The Tokyo Stock Exchange’s strengthened investor-focused information disclosure and requirement for public minority shareholder voting results are also referenced as case studies. As with past controversies surrounding LG Chem and LG Energy Solution’s physical split, and disputes over Doosan Mountain Cat and Doosan Robotics, even if corporate restructuring can be interpreted as growth strategies, the awareness of issues that could harm existing shareholders’ interests has become the background for system improvements.

Plans to enhance corporate value are also entering a supplementary phase. Starting in 2024, the government is guiding listed companies to independently develop and disclose corporate value enhancement plans; with the revision of the Tax Exemption Limitation Act at the end of 2025, a dividend income separation tax system will be introduced, significantly increasing participation centered on high-dividend companies. According to Korea Exchange statistics, as of April 2026, a total of 718 listed companies had disclosed related plans. However, among the 130 newly disclosed companies last month, about 95% focused on high-dividend companies, raising questions about whether this move is more aimed at increasing dividends rather than substantive governance improvements or business restructuring. Particularly, participation in the KOSDAQ market is relatively low, and the gap between markets has widened.

Meanwhile, authorities plan to publish a list of companies with a PBR in the bottom 20% of their industry every six months. A low PBR is generally interpreted as insufficient market recognition of the company’s asset value, and companies that have long hovered below 1x may face pressure to improve profitability, shareholder returns, and governance structures. In Congress, some legislators have submitted bills requiring companies with a PBR below 1x for two consecutive years to disclose corporate value enhancement plans mandatorily. While the authorities are cautious about further expanding incentives, market expectations are that future adjustments will be made to refine benefits based on participation and performance levels. On the other hand, authorities plan to launch a leveraged single-stock ETF (tracking a specific index) based on Samsung Electronics and SK Hynix as early as the end of May 2026. The goal is to bring back foreign investment demand to the domestic market. This trend is likely to develop toward restoring market confidence rather than short-term stock price stimulation, and whether system improvements can effectively translate into investor protection and corporate value enhancement will be a key variable in Korea’s future stock market evaluation.