Decoding RaymondsIndex: What 85.9% Actually Measured

■ A filing that arrived after the price

On 9 September a KOSDAQ-listed company closed up 13.19%. Its control-transfer filing was disclosed at 18:48 that evening, after the market had shut. The stock had traded in the 900-won range until mid-August, began climbing on 27 August, and jumped more than 17% on 7 September. Local coverage flagged the sequence as worth noting — and stopped there, which is the correct place to stop. Nothing in the public record establishes why the price moved first.

But the sequence itself is a methodological problem, and this is a good week to explain how we handled it.

■ What the number is, and what it is not

We analysed all 3,109 companies listed on KOSPI and KOSDAQ. Within that population, 276 experienced a trading suspension. Of those 276, 85.9% displayed a statistically significant relational signal before their financial metrics deteriorated. The signals fall into three families: board composition shifts, executive exodus, and concentrated private convertible-bond activity. Cohen's d exceeded 0.8 on all three dimensions — above the conventional threshold for a large effect, which is the reason we report it at all. An effect size answers a question a p-value does not: not "is there a difference" but "is the difference big enough to act on."

The design choice that matters most is the benchmark. We did not test whether relational signals lead the share price. Price is contaminated as a control variable precisely because of sequences like the one above: it can move before the record exists. Reported financials are a harsher benchmark and a cleaner one, because they arrive on a fixed statutory calendar that no participant can pull forward. Beating a schedule is a weaker claim than beating a market — and it is the only one we can defend.

■ Where a metric stops seeing

Cash governance is the index dimension most relevant to that same filing, and it illustrates the limit rather than the strength.

It reads a company's own cash: idle balances, short-term instruments, and whether capital raised actually converts into operations. On the inside face, this company's cash and equivalents fell from KRW 13.0bn at the prior year-end to KRW 4.4bn by end-June, with roughly KRW 7.6bn going to convertible-bond redemption in June. Equity stood at KRW 27.6bn against paid-in capital of KRW 25.7bn. All of that is legible.

The outside face is not. The acquiring vehicle — a partnership formed this month — reported KRW 0.51bn of its own assets against KRW 8.99bn in total consideration committed, and coverage noted that the funding plan bridging the two was not identified in the disclosure. No ratio computed from the target's financial statements can reach that gap, because the gap is not in them. It is in the relationship.

■ The same finding, from a different discipline

A US securities practice published a reverse-merger red-flag list on 8 September: recycled shells, insider enrichment and undisclosed related-party transactions, unreliable financials, weak governance, stock promotion schemes, and frequent name or ticker changes. Six items. Exactly one — unreliable financials — is read from a financial statement. The other five are read from structure, people, and history. That list was assembled by lawyers, not quants, on a different continent and a different regulatory regime, and it converges on the same place our data does.

■ Academic frame

Accounting-based failure prediction has an honourable lineage — Beaver (1966) and Altman (1968) established that ratios carry real discriminatory power, and nothing here disputes that. The limitation they inherited is timing: ratios are computed from statements, and statements are periodic. Cohen (1988) supplies the effect-size convention we lean on. La Porta et al. (1998) supply the institutional reason the lag is wider in concentrated-ownership markets: disclosure mechanisms systematically trail insider knowledge where control is held tightly.

■ What this means for an individual investor

Not that financial statements are useless. That they are punctual rather than early — and that when control changes hands, the decisive cash may sit one node beyond where any statement-derived number can look. Ask where the buyer's money is coming from. If the filing does not say, that silence is itself the observation.

This is general analysis of public filings, not investment advice regarding any security.

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