Editor’s note: This is general educational information about a policy debate in Korean equity markets. It is not investment advice, and the measures, dates and figures below are taken from the official regulatory and exchange documents listed at the end.
Analysis: The Debate Has Moved From Valuation to Control
The argument that the Korean market trades cheaply is not the part that policy can act on, and the documents show the authorities acting on something narrower and more tractable. Every measure above targets the same asymmetry: decisions taken by a controlling shareholder or a subsidiary board that change the value of what a minority shareholder holds, without that shareholder having a say or, in some cases, a disclosure to read.
The sequencing is telling. Disclosure came first and was voluntary, then a subset became mandatory, then a public ranking with a mechanical trigger, and finally a prohibition backed by listing review. That is an escalation from persuasion to compulsion carried out over roughly two years, and the escalation itself suggests the earlier steps did not do enough on their own. The exemption design in the low PBR standards makes the incentive explicit: publishing a plan buys a company two rankings of relief, and a company that stays in the bottom band for 12 consecutive rankings cannot buy any more.
The split listing rules go further than any of that, because they change who decides. Grounding the criteria in the fiduciary duty owed to all shareholders under the Commercial Act, and importing reasoning from Hong Kong, Taiwan and a Delaware precedent, moves the question out of the subsidiary’s boardroom. That is a governance change with a valuation consequence, not a valuation policy.
What the documents do not establish is the size of any effect. There is no official estimate here of how much of the gap between Korean valuations and those elsewhere is attributable to governance, and the FSC’s own framing is that the programme works over the medium to long term. A careful reader would watch three observable things instead: how many of the 842 KOSPI companies now filing governance reports move from explaining to complying, whether the first published low PBR list lands closer to 120 names or 220, and how many split listings are withdrawn at the parent board stage once the parent’s own shareholders have to approve the logic.
What the documents say
The phrase Korea discount is used as if it described a single measurable thing. In official documents it works differently. It appears as the problem statement for a policy programme, and the programme is where the argument becomes concrete: what companies must disclose, which of them get named on a public list, and whether a parent company may float a subsidiary that its own shareholders already own a claim on. Reading the rules is more informative than debating the label.
The Programme That Named the Problem
The Corporate Value-up Program was announced at a joint seminar on February 26, 2024, and its guidelines were unveiled at a second seminar on May 2 by the Financial Services Commission, the Korea Exchange, the Korea Capital Market Institute and other bodies. The framing offered there by FSC Vice Chairman Soyoung Kim was that listed companies’ value enhancement efforts would help the Korean stock market address the discount over the medium to long term, on top of the regulatory reforms of the preceding two years.
The machinery around that statement is worth more than the statement. A Corporate Value-up Advisory Group of 12 experts drawn from academia, business, investors and related institutions was launched on March 7 and worked through March and April on the direction of the programme and the draft guidelines. At a seminar for institutional investors on March 14, participants agreed to reflect key elements of the programme into the stewardship code, which the FSC noted has been signed by more than 200 institutional investors including four major pension funds. The support package named tax incentives, the development of the Korea Value-up Index, listings of ETFs tracking that index, consulting, training and awards for companies judged to be best in class.
Nothing in that list compels a company to do anything. The programme was built as a voluntary disclosure regime with incentives attached, and the FSC said so, describing the guidelines as the beginning of a long-term plan rather than its conclusion. Japan’s exchange has run a parallel initiative for its Prime and Standard Markets under the title Action to Implement Management that is Conscious of Cost of Capital and Stock Price, and the follow-up documents published by JPX show the same structure of case studies and periodic review.
Where Disclosure Stopped Being Voluntary
The corporate governance report is the part that has hardened into an obligation. Introduced in 2017 as a voluntary disclosure on a comply or explain basis, it was progressively extended, and on July 9, 2025 the FSC approved a partial revision to the KRX disclosure rules at its thirteenth regular meeting extending mandatory disclosure to every KOSPI-listed company from 2026. The change lifts the number of companies covered from 541, being those with total assets of KRW500 billion or more as of end-2024, to 842, which is all KOSPI-listed firms on the same date.
That is a step change in coverage rather than in content. The report still allows a company to explain rather than comply. What changes is that the smaller two-thirds of the KOSPI board must now write the explanation down where investors can compare it with everyone else’s.
Split Listings and the Duty Owed to Parent Shareholders
The sharpest structural item is split listing, the practice of listing a subsidiary while its parent remains listed. On July 6, 2026 the FSC and the KRX proposed detailed rules and guidelines to prohibit split listings that the authorities describe as asymmetrical in nature and as failing to give adequate consideration to the interests of the parent company’s shareholders. The regulators stated the historical problem directly: the decision to list a subsidiary had been treated as a matter for the subsidiary’s own board, so the parent’s board and controlling shareholder made no particular effort to protect the parent’s shareholders, and the rules were inadequate to do it for them.
The proposed criteria rest on the fiduciary duties owed to all shareholders under the Commercial Act, and the FSC says they were drawn up after examining split listing rules in Hong Kong and Taiwan and a judicial precedent on directors’ fiduciary duty from the state of Delaware. Under the proposal the parent’s board or its shareholders must first determine whether a split listing is appropriate and whether it harms the parent’s shareholders, before the KRX carries out a final review against criteria that sit on top of the general listing rules.
The List Nobody Wants to Be On
The most concrete instrument arrived on July 28, 2026, when the FSC and the KRX published draft standards for what they call listing up, and describe as naming and shaming, of companies with low price-to-book ratios. Companies in 11 key economic sectors and sub-industry groups, classified under the Global Industry Classification Standard, will be ranked from high to low PBR twice a year, on the first trading day of May and of November.
The thresholds differ by board. A KOSPI company that falls in the bottom 25 percent for three straight years, meaning six consecutive rankings, goes on the published list. On KOSDAQ the trigger is the bottom 10 percent over the same span. A company that discloses a corporate value enhancement plan containing specific measures to improve its PBR is exempted for one year, or two consecutive rankings, but the exemption is withdrawn once it has been in the bottom band for six straight years, or 12 consecutive rankings. A KRX simulation using data as of May 2026 put the eventual list at between 120 companies, being 80 on KOSPI and 40 on KOSDAQ, and 220 companies, being 130 and 90.
