S. Korea to offer tax incentives to boost value of listed firms

The financial regulator said Monday that it will work to incentivize efforts by local businesses to enhance their own value that will in turn lead to increased returns to investors.

The move comes as part of efforts to end the “Korea Discount,” where local shares are traded at prices lower than their fundamentals.

A seminar, attended by Kim Joo-hyun, the head of the Financial Services Commission (FSC), was held on the day to discuss how to encourage local firms to improve their value.

“At today’s seminar, key details of the Corporate Value-up Program, which have been jointly prepared by related institutions, were introduced to facilitate discussions and collect opinions from various stakeholders,” the FSC said.

The financial regulator added a second seminar will be held in May to “gather comments from businesses on the details of the guidelines with an aim to finalize the guidelines in the first half of this year.”

Under the proposed guidelines, the government will seek to provide “bold incentives, including various tax incentives” to encourage voluntary efforts by companies to boost their values and also communicate with the market through disclosures about their value-up programs.

The government will also develop a new Corporate Value-up Index that can be utilized by “institutional investors, including pension funds,” to make informed investment decisions by identifying companies that are anticipated to boost their corporate value, according to the FSC.

“(Exchange-traded funds) that track the Korea Value-up index will also be listed to facilitate retail investors’ access to these companies,” it added.

In addition, an entire department solely dedicated to supporting the corporate value-up program will be set up at the Korea Exchange, Seoul’s main bourse, along with a new advisory board to support voluntary efforts by listed firms, according to the financial regulator.

“To build up a positive feedback loop in our capital markets where listed companies are able to get proper valuation for sound growth and investors are able to share the profit of that growth and reinvest in the Korean capital market, the government needs to support companies’ voluntary efforts to raise their value,” FSC Chairman Kim was quoted as saying at the seminar.

Later in the day, First Vice Finance Minister Kim Byung-hwan met with visiting Ian Linnell, president of global credit appraiser Fitch Ratings, and discussed pending issues, including the Corporate Value-up Program, the ministry said.

Kim said the Seoul government will explore various ways to develop the country’s financial market, while Linnell also mentioned that the program would help address the Korea Discount problem in the local bourse market.