What is RaymondsIndex? — Index that lines up companies with capital allocation efficiency

Buying stocks means becoming a shareholder of the company.

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However, in the Korean capital market, minority shareholders (most individual investors)

It is more like a spectator pretending to be a shareholder.

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What is minority shareholder protection?

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Minority shareholders = shareholders other than the controlling shareholder (majority shareholder/owner)

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The key to protection:

The board of directors must represent the interests of minority shareholders.

- Important decisions (CB issuance, M&A, dividends) must be fair to minority shareholders.

- Right to access information: Minority shareholders must also know important information in a timely manner

The reality in Korea is different.

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Structural problems in protecting minority shareholders in Korea

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① Absence of independence of the board of directors

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Although there is an outside director system:

The person recommended by the majority shareholder is an outside director = in effect, the representative of the majority shareholder.

- The board of directors is a formality, and substantive decision-making is monopolized by major shareholders.

Carroll et al. (2024): Infringement on minority shareholder interests occurs structurally in a concurrent executive structure.

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② Conflict of interest in issuing CB and BW

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Major shareholder consolidated company acquires CB → recovers funds under favorable conditions

- Minority shareholders only suffer dilution

- Disclosure is minimal, structure is legal

Heo Seo-young (2025): Minority shareholder wealth is systematically transferred during the CB issuance-conversion process.

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③ Unclearness of dividend policy

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Dividend decision rights virtually monopolized by major shareholders

- Accumulation of capital in the name of in-house reserves → Strengthening the control of major shareholders

- Korea’s dividend payout ratio is significantly lower than international standards

④ Information asymmetry

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Major shareholders and executives have access to internal information

- Minority shareholders have access only to the price reflected after the announcement.

- CB conversion timing = typical case of utilizing internal information

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Why is this the key to Korea Discount?

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The biggest reasons why foreign institutional investors apply discount rates to the Korean market:

“A market where the interests of minority shareholders are not protected.”

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Min (2016): In the conglomerate structure, exploitation of minority shareholders occurs through legal channels.

Kim et al. (2021): This exploitation structure results in an increase in the cost of capital.

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What can individual investors do?

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It is difficult to change the system in the short term.

However, dangerous rescues can be avoided.

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Check CB issuance history

- Check board composition and outside director history

- Track changes in shares of major shareholders

- RaymondsRisk relational risk index inquiry

If you know the structure, you can avoid it.

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key message

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Protection of minority shareholders is also a systemic issue,

It is also an issue of information power of individual investors.

Relational risk was created to reduce information asymmetry.

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■ Reference materials

Min (2016): Chaebol structure and legal exploitation

- Kim et al. (2021): Expropriation and rising cost of capital.

-Carroll et al. (2024): Concurrently serving as executive officer and violating minority shareholder interests

- Seoyoung Heo (2025): CB conversion and loss of minority shareholders

- RaymondsRisk White Paper: https://www.konnect-ai.net/whitepaper

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