▲ Financial Services Commission
A list of companies whose price-to-book ratio (PBR) falls into the bottom 25% on the KOSPI and the bottom 10% on the KOSDAQ for six consecutive half-years (three years) will be made public for the first time in November.
The Financial Services Commission and the Korea Exchange announced detailed criteria for the public disclosure system targeting low-PBR companies today (July 28).
According to the detailed plan, companies will be categorized by market and industry (11 sectors based on GICS) to calculate their PBR every half-year. Those that fall below the threshold for six consecutive half-years will be included in the disclosure list.
Even if a company temporarily exceeds the threshold once, it will still be included if its PBR remained below the standard in six out of the preceding seven half-years, including the disclosure period.
However, for the initial disclosure, any company whose PBR exceeds the standard in the second half of this year will be excluded from the list, regardless of its past PBR.
The disclosure of low-PBR companies was introduced to encourage firms that neglect efforts to enhance shareholder value and leave their stock prices low—or even suppress them—to make improvements.
In March, authorities initially suggested "the bottom 20% for one consecutive year" as an example for disclosure, but extended the application period and adjusted the percentage criteria to account for industry boom-and-bust cycles and the time required for performance to materialize. For the KOSDAQ market, the disclosure rate was relaxed as volatility in PBR levels and rankings may increase during structural reorganization processes.
However, once the market stabilizes, measures to tighten the criteria may be reviewed.
A special exemption will also apply, exempting companies from disclosure for one year if they publicly disclose a corporate value enhancement plan that includes strategies to improve their low PBR.
Nevertheless, companies that fall below the threshold for a cumulative six years by market and industry will be excluded from this exemption.
The Korea Exchange plans to support firms by building a system where they can check whether they qualify for disclosure.
Based on data from May of this year, the disclosure targets are estimated at 80 to 130 companies for the KOSPI and 40 to 90 companies for the KOSDAQ, accounting for roughly 5% to 10% of all listed firms.
The list of low-PBR companies will be published on the exchange's disclosure website on the first trading day of May and November every year, and tags will also be attached to securities firms' mobile trading systems (MTS).
The exchange plans to provide accompanying briefing sessions and consulting for the targeted companies.
It also intends to reflect related matters in delisting substantive reviews and stewardship code guidelines.
The exchange will initiate legislative notices for rule and bylaws revisions next week, and after securing approval from regular meetings of the Securities and Futures Commission and the Financial Services Commission in September, it will officially disclose the low-PBR companies for the first time on November 2.
(Photo provided by the Financial Services Commission, Yonhap News)
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