Why concurrent executive positions are a red flag — corporate networks and the map of capital power

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Investors who trust financial statements are like driving with their eyes in the rear-view mirror.

Numbers are a record of events that have already ended.

The real danger begins with relationships, not numbers.

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■ 1. When capital is concentrated, relationships are also concentrated.

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As Piketty warned in Capital in the 21st Century, the rate of return on capital structurally outpaces economic growth. Capital is concentrated. And concentrated capital inevitably creates a network of relationships.

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Carroll, Huijzer, and Sapinski (2024) synthesized 100 years of corporate network research and stated: The interlocking directorate network is the real terrain of capital relations. A group with more capital controls more corporate boards of directors and intervenes in more corporate decision-making.

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Korea is no exception. As a result of RaymondsRisk v1.1 analysis, which tracked 49,446 executives of all KOSPI and KOSDAQ companies, changes in executive networks generated abnormal signals before financial indicators.

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■ 2. Sacrifices are designed

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Seoul National University DR Yang's (2017) doctoral thesis demonstrated an uncomfortable truth. Korean controlling shareholders dispose of or acquire their real estate through listed companies. Prices are set to benefit only controlling shareholders. Minority shareholders suffer losses. This is tunneling.

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Outside directors do not prevent this. Rather, they minimize their own legal risks by selectively not participating in board decisions that may be problematic. Rather than being a watchdog, he is closer to being a co-conspirator.

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The result is a scapegoat company. The peak capital uses the lower level companies as a tool, takes profits, and then exits. All that remains are the delisting and the affected individual investors.

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■ 3. CB is the blueprint for exploitation

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Heo Seo-young (2025) analyzed all 1,146 Korean CB issuances from 2017 to 2019. Convertible bonds with a refixing clause have an asymmetric profit structure from the beginning.

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When the stock price rises, you switch and make a profit. When the stock price falls, the conversion price is lowered and more shares are taken. CB investors win either way. On the other side, there are only individual shareholders who are diluted. This is the Death Spiral.

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The paper proved this with data. Immediately after the refixing CB issuance is announced, the cumulative abnormal return (CAR) of the stock price significantly decreases. The market already knows. Only individual investors don’t know.

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■ 4. Operations are captured with data

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Lee & Kim demonstrated the pump-and-dump stock price manipulation pattern using second-by-second order and transaction data for all stocks on the Korea Exchange (KRX). The manipulation forces were identified on an account-by-account basis, and the profitability of the manipulation was quantified.

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Operation is not a personal deviation. The network does it.

Peak capital → intermediate corporation → dispatch of executives → CB issuance → stock price boost → sale → delisting.

In this chain, relationships change first. Executives are replaced, CBs are issued, and shares are diluted. There is still nothing wrong with the financial statements.

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Of the 276 companies with trading suspensions analyzed by RaymondsRisk, 85.9% were pre-captured in relational indicators. As a result of Cohen's d analysis, the difference between normal companies and suspended companies was much larger in relational indicators than in financial indicators (d > 0.8).

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■ 5. What individual investors need

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Until now, individual investors only knew two things. Financial statements and charts. Both are lagging indicators.

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Institutions and forces know network information. Who serves as a director of which company, which private equity fund acquired CB, and when did the largest shareholder begin to reduce his stake. The flow of this relationship is the flow of capital.

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Relational risk exists to narrow this asymmetry. Executive Network (Human Risk), Funding Structure Change (Funding Risk), Governance Risk. These three relationship indicators are analyzed as leading signals and provided to individual investors.

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Read the relationships behind the numbers.

The signal has already started when the financial statements are in order.

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■ References

- Carroll, Huijzer & Sapinski (2024). Corporate Networks. Handbook of Social Network Analysis.

-Yang, D.R. (2017). Three Essays on Corporate Governance. Seoul National University doctoral thesis.

- Heo Seo-young (2025). When Are Convertible Bonds Converted? Master's thesis, Seoul National University.

- Lee, EJ & Kim, R. Trade-Based Pump-and-Dump and Profitability. SSRN Working Paper.

- RaymondsRisk v1.1 White Paper: https://www.konnect-ai.net/whitepaper

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