South Korea's Value-up Program at 0.7% Participation: Inside the Fight Against the 'Korea Discount'

In February 2024, South Korea embarked on one of the most closely watched corporate governance experiments of the decade: the Corporate Value-up Program, a voluntary disclosure regime designed to dismantle the so-called "Korea discount" — the persistent gap between the market valuation of Korean listed companies and those of their global peers. Six months later, the experiment has produced an awkward headline number. As of 23 August 2024, only eight companies had actually published value-enhancement disclosures, or 0.3% of the 2,585 firms listed on the Kospi and Kosdaq markets, according to Korea Exchange data. Add the ten companies that filed pre-announcements, and total participation reaches just 0.7%. This deep dive examines what the program is, why participation has stalled, how the Korean approach compares with the Japanese model it was meant to emulate, and what the tax package now moving through the National Assembly could change for boards, shareholders and foreign investors.

From diagnosis to program: what the value-up initiative actually asks of companies

The premise of the reform is decades old. Korean equities have long traded at lower multiples than comparable companies in other developed markets, despite strong export champions, high corporate savings and world-class positions in chips, ships, batteries and cars. Analysts have attributed this undervaluation to a cluster of structural causes: conglomerate governance that privileges controlling families over minority shareholders, low dividend payout ratios, heavy inheritance tax burdens that historically made a depressed share price convenient for succession planning, and a legal framework with weak minority protections. The diagnosis is not new; what changed in 2024 was the government's decision to act on it through a named, publicly monitored program.

The initiative was rolled out by the government in February 2024 and formally launched in May, when the disclosure framework went live. Its mechanics are deliberately soft. Companies are encouraged — not required — to publish a "value enhancement plan" setting out their own diagnosis of where value is being lost and their commitments to fix it.

The anatomy of a value-up disclosure

In the guidance circulated by the authorities and the Korea Exchange, a credible plan is expected to contain several building blocks:

• a self-assessment of the company's valuation relative to book value and to sector peers, typically framed around metrics such as the price-to-book ratio, return on equity and payout ratios;
• medium-term targets — for example, a stated path for profitability, capital efficiency or leverage;
• concrete shareholder return commitments, such as dividends, buybacks and the cancellation of treasury shares;
• governance improvements, including board practices and communication with minority investors;
• a schedule for periodic follow-up, so that the market can hold management to its own promises.

The theory behind voluntary disclosure is signalling: a management team confident in its numbers gains a competitive valuation premium by publishing them first, and laggards face reputational pressure from investors, the exchange and the financial press. The theory works only if enough credible names move early. That is precisely where the Korean program has struggled.

The participation scoreboard: 0.3% of listed companies by late August

The numbers compiled by the Korea Exchange and reported by The Korea Herald paint a picture of near-total wait-and-see. Nearly three months after the May launch, the state of play was as follows:

• eight companies had published formal value-up disclosures — 0.3% of the 2,585 firms listed across the Kospi and Kosdaq;
• a further ten companies had issued pre-announcements, promising a full plan later, bringing combined participation to 0.7%;
• the overwhelming majority of early movers were financial-sector firms — banks, insurers and brokerages — which are themselves among the most visibly undervalued segments of the market;
• outside finance, participation was close to zero until LG Electronics, one of the country's top ten conglomerates, filed a pre-announcement on 23 August and promised a full disclosure by the fourth quarter of 2024.

A participation rate below 1% after three months is not a rounding error; it is a market-wide statement that boards do not yet believe the benefits of disclosure outweigh the risks. Those risks are real: publishing targets creates accountability, and in a market where more than half of listed firms trade below book value, any honest self-assessment is also an admission of how much value has been destroyed or trapped.

Financial firms moved first — and the market rewarded them

The early-mover cohort reads like a directory of the financial sector. Kiwoom Securities cut the ribbon as the first company to publish a plan. Two of the country's largest banking holding groups, Shinhan Financial Group and Woori Financial Group, followed with full disclosures, while KB Financial Group and the digital lender Kakao Bank issued pre-notices signalling their own plans were in preparation.

Why banks and brokers first? Three reasons stand out. First, financial firms are chronically cheap on price-to-book terms, so a credible commitment to higher payouts directly addresses their own valuation gap. Second, their businesses are already regulated and disclosure-heavy; publishing a plan is an extension of existing practice rather than a leap into the unknown. Third, the government's reform agenda has visibly favoured shareholder returns in the financial sector, and being seen as a good citizen has franchise value when supervisors and lawmakers are watching.

The market response has been unambiguous. In the year to late August 2024, the KRX Bank Index rose 34%, the KRX Insurance Index gained 31% and the KRX Securities Index advanced 20%. Financial stocks have become the de facto vehicle for expressing the value-up trade. That rally does double duty: it rewards the pioneers and quietly shames the absentees — exactly the peer-pressure mechanism the program's architects were counting on.

The conglomerates: pressure from the exchange, silence from the boards

Outside finance, the picture was one of hesitation until the final week of August. The turning point came on 21 August 2024, when Korea Exchange chief executive Jeong Eun-bo convened executives from the country's biggest conglomerate groups — Samsung, SK, LG and Hyundai Motor — and urged them to take the lead. Two days later, LG Electronics became the first of the top ten chaebol to commit, filing a pre-announcement and promising an official disclosure within the fourth quarter.

The conglomerates' reluctance is explicable. For family-controlled groups, a value-up plan is not merely an investor-relations document; it touches succession economics, cross-shareholding structures and the allocation of cash between dividends and the retention that has historically funded expansion — and family control. Committing to higher payouts in writing raises the cost of any future governance controversy. The LG Electronics pre-announcement mattered precisely because it cracked that wall, however narrowly.

The Japanese comparison: the same idea with sharper teeth

Seoul has been explicit that it seeks to emulate Japan, where the Tokyo Stock Exchange's January 2023 call for companies trading below one times book value to disclose capital-efficiency plans triggered a broad re-rating of Japanese equities. Japan launched its formal program in March 2023 with one crucial difference: companies with a price-to-book ratio under one were expected to submit enhancement plans — a targeted obligation aimed exactly at the worst offenders, rather than an open invitation to volunteers.

The participation curves diverge sharply:

1. In Japan, within four months of the March 2023 launch, roughly 13% of covered companies had participated; by year-end the figure had risen to about 28%.
2. In South Korea, within three months of the May 2024 launch, participation stood at 0.3% on formal disclosures and 0.7% including pre-announcements — an order of magnitude below the Japanese trajectory.

The comparison is not perfectly like-for-like; the Japanese denominator counts companies specifically pressed to act because of sub-1.0 price-to-book ratios, while the Korean figure spans all 2,585 listed firms. But the direction is unmistakable, and it is reinforced by an uncomfortable statistic: more than 50% of Korean listed companies trade below book value, a far higher proportion than in other developed or fast-growing markets. Korea has a bigger undervaluation problem and, so far, a weaker mechanism to address it.

Why the design gap matters

The Japanese model worked because it combined naming with shaming: the exchange identified the target population, asked pointed questions, and published responses. Korea's fully voluntary first phase gives boards an easy opt-out — silence carries no formal penalty. Market participants have therefore treated the July tax proposals, and the Korea Exchange's escalating pressure on the chaebol, as the de facto enforcement layer that the initial design lacked.

What the market did — and did not — do

If the program had convinced investors that Korean corporate governance was being restructured at the root, the index response would have been dramatic. It was not. The benchmark Kospi ended the three months from 2 May to 23 August 2024 almost exactly where it started, edging from 2,683 to 2,701 points. Beneath that flat surface, volatility was severe: the index peaked at 2,891 on 11 July and slid to 2,441 on 5 August amid the global summer sell-off, leaving no stable uptrend in place by late August.

The foreign flow data tell a similar story of fading conviction. Between 26 February 2024 — the day the program was announced — and the end of April, foreign investors were net buyers of 8.6 trillion won (about $6.5 billion) of Korean equities, betting that the reform would re-rate the market. From May through 23 August, net purchases halved to 4.1 trillion won, and May itself brought the first net monthly sale of the year, with 1.3 trillion won offloaded from the Kospi. Global volatility played a role, but so did the participation numbers: the value-up story was not, on its own, strong enough to hold foreign money in place.

Institutional scepticism is measurable. A Bank of America survey of around 200 Asian fund managers in August 2024 found that nearly 70% expected the program to have a minimal-to-moderate impact: 22% anticipated "no significant impact" and 44% a "moderately positive impact". Only a minority were positioning for a Japan-style re-rating. That survey is a useful proxy for how much reform credibility Seoul still has to earn.

The tax package: the carrot now on the table

The government's answer to weak participation is fiscal. In July 2024, the Finance Ministry proposed a set of tax code revisions explicitly engineered to change the incentive structure around shareholder returns:

• corporate tax reductions for companies that increase shareholder returns — effectively subsidising higher dividends and buybacks at the company level;
• lower dividend income taxes for individual investors, improving the after-tax yield of holding Korean equities;
• a major overhaul of the inheritance tax, including a lower maximum rate and the elimination of the 20% surcharge on controlling stakes in major companies — the provision that matters most to chaebol families, because the inheritance burden has long been cited as a reason controlling shareholders tolerated, or even preferred, depressed valuations.

The bill was scheduled for submission to the National Assembly in September 2024, with implementation contingent on parliamentary approval. For boards sitting on the fence, the package changes the arithmetic: if inheritance taxes fall and payouts are tax-advantaged, the private cost of keeping a company cheap declines sharply. The value-up program began as a reputational campaign; with the tax package, it acquires a financial engine.

The political risk premium

That engine has an obvious failure mode. The Democratic Party of Korea, which controls much of the legislative agenda, has branded the package a law "favouring the wealthy" — a potent frame in a country with intense public sensitivity to chaebol privilege. The inheritance tax provisions are the most exposed: they benefit controlling families directly, and opponents will argue they reward precisely the behaviour the reform is meant to discipline. If the bill stalls or is stripped of its key provisions, companies that delayed disclosure in the hope of tax relief will have been right to wait, and the program's credibility will suffer a second blow.

What analysts take from the stalled start

Sell-side strategists remain cautiously constructive. Park So-yeon, an analyst at Shinyoung Securities, acknowledged the risk that the tax support could be derailed by the opposition, but argued that "despite some differences in approach, the commitment to protecting general shareholders' rights is becoming clearer", and expected the emphasis on value stocks to strengthen over time. Park Se-yeon, a researcher at Hanwha Investment & Securities, took a similar view, noting that the value-up policy is "gaining traction across politics, business and investors" and that, with strong government commitment, there is significant potential for share price gains in the second half of the year.

The exchange is also building market infrastructure to sustain momentum. The Korea Exchange was set to launch a dedicated value-up index in September 2024, with an exchange-traded fund tracking it expected by the end of the fourth quarter. An index changes the game at the margin: it creates a passive-flow channel into compliant names, gives fund managers a benchmark for the reform trade, and — crucially — makes exclusion a visible statement about a company's governance. In Japan, index-linked products became one of the quiet engines of the re-rating.

The bigger picture: can voluntary pressure close the Korea discount?

The first six months of the value-up program expose the limits of voluntarism in a market where undervaluation is, for some insiders, a feature rather than a bug. The early evidence suggests three working conclusions. First, sectoral leadership matters: the financial industry's participation and its 20–34% index rally gave the reform its only visible success story by August 2024. Second, design matters more than rhetoric: Japan's targeted expectation for sub-book-value companies produced 13% participation in four months, while Korea's open invitation produced 0.7% in three. Third, the tax package and the value-up index are where the real leverage now sits — one changes family economics, the other changes fund flows.

What to watch next

• the September 2024 fate of the tax bill in the National Assembly, and whether the inheritance tax provisions survive in usable form;
• whether LG Electronics' promised fourth-quarter disclosure is substantive enough to become a template for other top-ten conglomerates, and whether Samsung, SK and Hyundai Motor follow;
• the composition and performance of the Korea Exchange value-up index and its ETF, as a gauge of whether passive money will pay for compliance;
• foreign flow data through the fourth quarter — the clearest verdict from the investors the reform was designed to convince;
• the share of non-financial companies filing disclosures, the single best indicator that the program has escaped its financial-sector cradle.

A participation rate of 0.7% is not a verdict on the Korea discount; it is a verdict on the first design of the program that tries to cure it. The government has since added pressure on the chaebol, tax incentives and index infrastructure to the original voluntary framework. Whether those layers convert hesitation into disclosure — and disclosure into re-rating — will be decided over the following quarters, in boardrooms and in the National Assembly alike. For investors, the message of late August 2024 was clear enough: the reform is real, the incentives are not yet aligned, and the cheapest market in the developed world will not re-rate on announcements alone.