KOSPI Falls More Than 3% on AI Profitability Concerns, Focus Turns to Memory and Corporate Governance

A PBR of around 0.2 times means that the market recognizes only a fraction of the net assets a company holds. In a country with a properly functioning stock market, this is a figure that should be considered humiliating, and investors should examine why the gap exists. The first step is to change the attitude that treats undervaluation as a long-standing norm.

Governance and inheritance issues were cited as factors behind companies’ preference for low share prices or indifference to share-price gains. Examples included controlling shareholders who are uncomfortable with share-price increases because of inheritance tax burdens, and companies that view assets such as real estate as being held for business purposes and unrelated to their market valuation. But listed companies must be accountable for the investment value of ordinary shareholders, not the circumstances of controlling shareholders.

Disclosing low-PBR companies alone will not complete the process of change. If authorities only strengthen reporting requirements and penalties, companies may not act. Incentives such as tax benefits for companies that make progress are needed alongside measures to hold accountable those that do not. Shareholders in the disclosed companies should also determine why the value of their investments is being rated so poorly and demand change.

The Hanjin KAL case highlights the vulnerability of Korea’s chaebol structure, in which large business groups can be controlled with relatively small stakes. Even when an owner asserts control, a low ownership percentage can leave that control vulnerable to share purchases by outside investors. Building a stable stake must go hand in hand with earning shareholder trust over the long term.

Rather than scrambling for friendly shareholders in a crisis, controlling shareholders should broaden their support base through business performance and shareholder-return policies in normal times. They could also consider governance reforms such as mergers or treasury-share cancellations, but first they must reward shareholders through dividends and improvements in corporate value. If a company is well managed and respects its shareholders, they may voluntarily become allies in a control dispute.

Hoban Group has also faced criticism that it should use capital accumulated through its real estate business for industrial investment and job creation rather than a contest for shares. The underlying concern is that corporate funds should be used to raise productivity and create jobs. The Hanjin KAL control dispute could become a test case not only for an individual company but also for the direction of change in corporate governance and capital markets in Korea.