Korea’s Value Up Launch Disappoints?

Hoping to emulate Japan's achievements in increasing shareholder returns and enhancing share value through corporate governance reforms, South Korea’s government and stock exchange outlined a set of measures kicking off a multi-year overhaul process. However, prospects for following in Japan’s footsteps may be overstated due to fundamental differences in corporate structures: Korean corporates are controlled by a handful of powerful families with considerable political influence, while the challenge that faced Japanese policy makers was entrenched professional managers insulated from shareholder interests.

So far, the reception of the reform measures among investors has been tepid. Equities declined in the aftermath of the announcement. Investors voiced concerns over the absence of details and enforcement mechanisms. Investors will now look for signals of the government’s willingness to take the initiative up a notch, adding sticks along its carrots. Failure to take more stringent measures will likely result in international investors remaining on the sidelines.

Stay tuned for a more detailed piece on the South Korean reforms in our upcoming newsletter by Mike Lubrano.