RaymondsIndex

Korea Discount.

It is already known that Korean stocks are undervalued compared to the global market.

But the answer to “why” is still elusive.

“Corporate governance issues,” “chaebol owner risk,” “political instability” — these are correct, but too vague.

Relational risk points to a specific mechanism.

Structural causes of Korea discount

① Focus on executive network

A few executives simultaneously control multiple listed companies

- Absence of board independence → Controlling shareholders’ interests take priority over minority shareholders’ interests

- Carroll et al. (2024): Concurrent executive positions are a structural mechanism of capital power concentration

② Capital transfer through CB/private investment

Minimize disclosure → Maximize information asymmetry

- CB issuance → Internal network acquisition → Refixing → Conversion sale → Taking on personal volume

- Yang (2017): This is the Korean structure of tunneling

③ Financial statement reliability issues

Decreased audit quality → Increased possibility of fraud

- Large institutions already know this and apply discount rates

- Only individual investors believe in published numbers.

④ Relationship network opacity

Executive history, CB acquirer network, major shareholder transactions → Fragmented disclosure

- Without tools to connect and view, individuals become structural victims.

- Why RaymondsRisk quantifies this

Conditions for resolution of Korea discount

For the value up program to be effective, improving financial indicators alone is not enough.

Ensure executive network transparency

- Strengthen disclosure of conflicts of interest in CB/private investment transactions

- Substantialization of minority shareholder protection mechanism

Without this, 1x PBR ends up being a numbers game.

key message

Korea discount is not a matter of numbers.

It's a network problem.

If the network cannot be read, discounting continues.

■ Reference materials

Carroll et al. (2024): Concurrent executive positions and concentration of capital power.

- Yang (2017): Demonstration of tunneling mechanism

- Kim KS (2015): CMS structure verification

- Min (2016): Chaebol legal exploitation structure

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

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