The Korea Exchange (KRX) on the 16th held a public seminar to gather industry opinions on a plan to ban duplicate listings in principle.
This seminar was prepared to gather a range of views from industry officials on the direction of banning duplicate listings in principle that the government released earlier. Earlier, on the 18th, at a "capital market stabilization and normalization meeting" presided over by the president, the government released the direction for a principle ban on duplicate listings, exceptions, and allowances.
Duplicate listings refer to a parent corporation and its subsidiary being listed side by side, and the dilution of the parent corporation's value caused by duplicate listings has served as a factor in the undervaluation (discount) of Korea's stock market.
Lee Eog-weon, Chairperson of the Financial Services Commission (FSC), attended the seminar and said, "Controlling shareholders have easily used duplicate listings as a means to expand business institutional sectors and affiliates while maintaining de facto control," and added, "We will strictly distinguish and review asymmetrical duplicate listings, where the benefits of listing are concentrated among a few, from duplicate listings that are fair to all shareholders."
The Chairperson also noted, "We will have the parent company's board assess the impact of duplicate listings on shareholders, prepare measures to protect shareholders, and communicate on an ongoing basis," and added, "We will fully gather opinions on detailed standards and procedures, and after the system is implemented, we will prepare and supplement guidelines through best practices derived from individual reviews to increase the specificity and predictability of the standards."
Industry participants at the seminar, including investors, corporations, securities firms, venture capital, academia and the legal community, offered a range of views on the ongoing issue of duplicate listings in the domestic stock market and on excessive regulation.
An investor who attended the seminar said, "Duplicate listings allow controlling shareholders to wield excessive control even when their actual equity stake is low," and added, "This connects as a cause for controlling shareholders to avoid returning profits to shareholders and becomes one of the core reasons for the Korea discount."
In fact, duplicate listings act as a burden on the parent company's share price. According to a presentation titled "Current status of duplicate listings and regulatory implications" by Na Hyeon-seung, a professor in the Department of Business Administration at Korea University, who attended the seminar, the parent company's share price was shown to have declined an average of 10.81% based on six months after the subsidiary's initial public offering (IPO).
Professor Na presented these data by sampling 261 cases of subsidiary listings from 2000 to 2024 and measuring excess returns and holding-period returns from before and after the listing disclosure to six months after listing.
By contrast, corporations conveyed concerns about management side effects from excessive regulation of duplicate listings. If domestic duplicate listings are in principle banned, overseas listings of subsidiaries could increase, weakening the competitiveness of the domestic capital market.
There was also an opinion that if subsidiaries acquired through mergers and acquisitions (M&A) cannot be listed, the M&A market could contract.
From academia came voices pointing out conflicts of interest between controlling shareholders and general shareholders caused by duplicate listings. A decision to pursue duplicate listings in the interest of a controlling shareholder could run counter to the interests of general shareholders.
The Korea Exchange (KRX) said it will reflect the opinions raised at the seminar, prepare a draft of the rules within this month, and implement the related system starting in July.