Professor Aurelio Gurrea-Martínez, Associate Professor of Law Joon Hyug Chung and Assistant Professor of Law Nydia Remolina associated variously with the Singapore Management University Yong Pung How School of Law, the European Corporate Governance Institute (ECGI) and Seoul National University School of Law have taken a look at the ‘Value-Up’ initiatives across Asia, begun in Malaysia in 2022.
They start by reminding, despite big headlines about developments in Japan in 2023 and Korea in 2024, Malaysia kicked off the process which has seen subsequent implementation also in Taiwan, mainland China, Thailand and Singapore.
Certain common features of Asian stocks markets have led to a region that’s notoriously cheap to the point, in Korea’s case, it’s even attracted the descriptor ‘the Korea discount’. Over 40% of companies in the region trade at a discount to book value and among the recurrent features underlying this are:
Concentrated ownership. Families, individuals, governments and quasi-government organizations control most of the listed universe.
Companies in the region hoard cash and are grudging dividend payers. This would be OK if many were distressed, but they’re not.
Institutional investors play a smaller role in the region than elsewhere. The Mom and Pop stereotype has justifiable resonance in most Asian markets.
On the issue of have these programs been effective? the researchers can’t come to a definitive conclusion. As they rightly point out in markets there are many moving parts so identifying a single factor’s effect is problematic.
Moreover, there’s a time issue. Even if a company wholeheartedly signed on for value-up initiative implementation it’d take years, not weeks or months for the policy change to bear tangible fruit.
On balance the paper concludes these programs contribute usefully to the progression of better corporate governance and should be seen in the context of greater attention in this area. In addition, there are markets elsewhere in the world that could benefit from similar programs, particularly in Africa and South America.
The work is a useful primer if the subject is new to you and you can review it in full via the following link Value-Up Initiatives as a Strategy for Corporate Governance and Capital Market Development.
Happy Sunday.