Corporate Governance Disclosure Expands, But Fails to Dent 'Korea Discount'

Starting in 2026, corporate governance reporting became mandatory for all KOSPI-listed companies, but the price-to-book ratio (PBR), a key valuation metric, has remained stagnant.

This is because companies are merely fulfilling formal disclosure requirements rather than making substantive qualitative improvements to areas like board structure or capital policy.

For a genuine re-evaluation of corporate value, a shift is needed from simple disclosure to demanding concrete improvement plans and monitoring their implementation, similar to Japan's approach.

The expansion of mandatory corporate governance reporting to all KOSPI-listed firms has not yet led to the anticipated market-wide re-valuation.

At the heart of the issue is a gap between form and substance. While Korean companies have improved their compliance rates with governance reporting, this has largely been a box-ticking exercise. A recent analysis by the Korea Capital Market Institute (KCMI) highlights this disparity: compliance is high for straightforward items like electronic voting, but remains low for more critical and challenging areas. These include separating the roles of CEO and board chairman, establishing clear CEO succession plans, and implementing transparent capital allocation policies. Essentially, companies are fulfilling the letter of the law without embracing its spirit.

This is where the comparison with Japan becomes instructive. The Tokyo Stock Exchange (TSE) didn't just ask companies to disclose information; it urged them to create and publish action plans to improve their capital efficiency and stock prices, especially those with a low PBR. Crucially, the TSE followed up by publishing a list of companies that complied, creating powerful peer pressure and a clear signal for investors. This approach of demanding 'plans and execution' rather than just disclosure has been a key driver of the Japanese market's recent success.

In Korea, the effects of the 'Value-up Program' have so far been selective. While a few large-cap stocks in sectors like semiconductors and automotive have seen their PBRs rise, a vast number of companies remain undervalued. Data from the ASEAN+3 Macroeconomic Research Office (AMRO) shows that around 70% of KOSPI-listed firms still trade below a PBR of 1.0. This indicates that the market re-rating is not a broad-based trend but a concentrated phenomenon, failing to resolve the structural 'Korea Discount'.

Therefore, the key takeaway is that simply expanding the scope of disclosure is not enough. For a meaningful and widespread re-rating to occur, the focus must shift from quantity to quality. Regulators and institutional investors, like the National Pension Service, need to pressure companies to move beyond checklists and articulate clear, actionable plans for enhancing shareholder value. Without this shift towards accountability and implementation, the Korean market risks seeing its valuation gap persist.

Glossary
PBR (Price-to-Book Ratio): A financial ratio used to compare a company's current market price to its book value. A PBR below 1.0 can suggest the stock is undervalued.
Korea Discount: The tendency for South Korean companies to have lower valuations compared to global peers, often attributed to issues like weak corporate governance, low dividend payouts, and geopolitical risks.
Stewardship Code: A set of principles that guide institutional investors to actively engage with their invested companies to enhance long-term shareholder value.

Corporate Governance Disclosure Expands, But Fails to Dent 'Korea Discount'

Starting in 2026, corporate governance reporting became mandatory for all KOSPI-listed companies, but the price-to-book ratio (PBR), a key valuation metric, has remained stagnant.

This is because companies are merely fulfilling formal disclosure requirements rather than making substantive qualitative improvements to areas like board structure or capital policy.

For a genuine re-evaluation of corporate value, a shift is needed from simple disclosure to demanding concrete improvement plans and monitoring their implementation, similar to Japan's approach.

The expansion of mandatory corporate governance reporting to all KOSPI-listed firms has not yet led to the anticipated market-wide re-valuation.

Glossary
PBR (Price-to-Book Ratio): A financial ratio used to compare a company's current market price to its book value. A PBR below 1.0 can suggest the stock is undervalued.
Korea Discount: The tendency for South Korean companies to have lower valuations compared to global peers, often attributed to issues like weak corporate governance, low dividend payouts, and geopolitical risks.
Stewardship Code: A set of principles that guide institutional investors to actively engage with their invested companies to enhance long-term shareholder value.