A report by the Bank of Korea indicated that the corporate value of our country is at the lowest level compared to major countries. It was shown to be lower than that of Indonesia and South Africa, which have smaller economies than Korea. The Bank of Korea advised that returning profits to shareholders should be increased to enhance corporate value.
On the 17th, the Bank of Korea published a BOK issue note titled "The Impact of Shareholder Return Policy on Corporate Value." This research was co-authored by Kim Sun-im, Vice Administrator of the National Income Comprehensive Team, and Son Dal-ho, Director of the Planning and Financial Team at the Daegu-Gyeongbuk Headquarters.
According to the research team, from 2019 to 2023, the average annual growth rate of revenue for corporations in our country was 2.5%, higher than that of some advanced countries such as Japan (-0.1%) and the United Kingdom (0.0%). The liability ratio was 2.4%, lower than the average of major countries (2.9%). This result was based on a study excluding China, which has many state-owned corporations, Australia and Saudi Arabia, which lacked data, and the European Union (EU), which is not a single country.
However, based on the price-to-book ratio (PBR) and Tobin's Q (the market value of assets divided by book value), the corporate value of our country ranked at the lowest level. The PBR of Korean corporations was 1.4, lower than that of high-growth countries (India 5.5) and advanced countries (the United States 4.2, the United Kingdom 3.3), while the Tobin's Q was 2.1, also lower than major countries (India 6.2, the United States 4.8, the United Kingdom 3.9). Both figures lagged behind Indonesia and South Africa, which have smaller economies than our country. Among 16 countries surveyed, Korea ranked 14th.
The research team pointed to the low protection of shareholders and shareholder return in Korean corporations as the causes of this phenomenon. Shareholder protection refers to the level at which a corporation's governance and government regulations safeguard shareholder interests, while shareholder return means sharing corporate profits with shareholders through dividends and stock buybacks. The average shareholder protection score for corporations in our country (6.8) ranked 12th among the 16 countries analyzed, and the dividend payout ratio (27.2), which indicates the level of shareholder return, was the lowest among the 16 countries.
The research team demonstrated through panel regression models that higher levels of shareholder protection and shareholder return correspond to increased corporate value. The analysis showed a significant positive relationship between the scale of shareholder return and corporate value, and the shareholder protection indicators generally had a positive impact on corporate value. Particularly in industries like finance, where the need for capital expenditure is low, the impact of shareholder return on corporate value was significant.
The research team noted, "In our country, where shareholder protection is weak, expanding shareholder return might be effective in enhancing corporate value," adding that "there is a need for consistent efforts to improve corporate governance, including protecting general shareholders and enhancing investor confidence during corporate partitioning and mergers."