Most of the top corporations by market capitalization on the KOSPI, excluding Samsung Group, have initiated value enhancement disclosures. The market is paying attention to whether Samsung will participate in value enhancement next month, regardless of the judicial risks facing Chairman Lee Jae-Yong. Kim Byung-Hwan, the Chairperson of the Financial Services Commission, who declared, 'We will push forward the value enhancement program without wavering even in the new year,' is being urged to take responsibility as the head of the financial authorities and drive participation from Samsung Group in early-year value enhancement disclosures. Experts say that the shareholder return policy of large corporations is the most effective driver for rising stock indices.
According to the Korea Exchange's corporate disclosure information system (KIND), among the top 20 KOSPI companies by market capitalization as of the closing price on Jan. 3 (excluding preferred stocks), 13 have made value enhancement disclosures while 7 have not disclosed. Of the 7 non-disclosing corporations, 5 are affiliates of Samsung Group, including Samsung Electronics, Samsung Biologics, Samsung C&T Corporation, Samsung Life Insurance, and Samsung SDI. The remaining two are Celltrion and Naver. If Samsung Group engages in value enhancement disclosures, it means that 90% (18 corporations) of the top 20 by KOSPI market capitalization are responding to the government's value enhancement policy.
In fact, Samsung Electronics was one of the corporations that raised their voice the most vigorously when the financial authorities outlined the value enhancement program early last year. A senior official of the Financial Services Commission said, 'When creating the value enhancement guidelines, we listened to the opinions of major listed companies, and Samsung Electronics was the company that showed the most interest and actively provided feedback.' At that time, it was thought that Samsung would be the first to make value enhancement disclosures.
According to the summary of conversations among financial authority and business representatives, it is reported that Samsung Electronics has internally completed the content to be included in its value enhancement disclosure. The company's investment blueprint, including a stock buyback plan worth 10 trillion won disclosed last November, is said to be part of Samsung Electronics' value enhancement plans. Market participants believe that Samsung's weighing of the timing for value enhancement disclosures is due to the unresolved judicial risks surrounding Chairman Lee Jae-Yong.
Currently, Chairman Lee is indicted on charges related to unfair mergers and accounting fraud linked to the management succession process. The prosecution determined that misconduct occurred during the merger of Samsung C&T Corporation and Cheil Industries in May 2015, including false information dissemination, critical information concealment, major shareholder purchases, illegal lobbying, and market manipulation. However, in February last year, the first trial court acquitted him of all 19 charges brought forward by the prosecution. Chairman Lee is awaiting the appellate court's verdict set for Feb. 3.
Some in the market are saying that even if Chairman Lee were to receive a guilty verdict, Samsung Group must hasten to participate in the value enhancement disclosures. This is due to various domestic and international adversities dampening the mood in the Korean stock market, such as the inauguration of the Donald Trump administration, which has signaled a tariff war, adjustments in the pace of interest rate cuts, economic slowdowns, and moves to impeach President Yoon Suk-Yeol. Participation in value enhancement policies by the number one KOSPI-listed Samsung Electronics is cited as a factor that could stir up weakened domestic investor sentiment.
Market participants say that the role of Kim Byung-Hwan, the Chairperson of the Financial Services Commission, is crucial. For now, the Chairperson has successfully seated Samsung Electronics at public events related to value enhancement. The Financial Services Commission held a 'Corporate Value Enhancement Meeting' chaired by Kim on the 26th of last month, attended by several representatives from listed companies, including Samsung Electronics. At this meeting, Samsung Electronics expressed its intention to participate in value enhancement disclosures.
A senior official from the financial investment industry stated, 'The participation of Samsung Electronics at the meeting should not be seen merely as a formality; the Chairperson must prove this responsibility,' adding that 'given the challenging market conditions, it is necessary to diligently supply events that could be positive for the market.' The Chairperson noted, 'A culture that respects shareholder value is gradually spreading among domestic listed companies,' and emphasized, 'We will consistently and resolutely proceed with the value enhancement policy.'
The reason market participants are waiting for Samsung Electronics to join the value enhancement initiative is that it is a leading company. According to a report titled 'Assessment of Undervalued Listed Corporations in Korea' recently published by the Capital Market Research Institute, 75% of large corporations, which represent the top 30% of the market capitalization as of the end of 2023, achieved returns on equity (ROE) over the past decade that surpassed their stock returns.
Researchers Lee Sang-Ho, Kang So-Hyun, and Lee Min-Gi from the Capital Market Research Institute stated, 'If these corporations actively expand cash dividends or undertake stock buybacks and retirements to compensate for their low stock returns, then it is possible to both enhance total shareholder returns and expect significant increases in stock indices.'