By Michael Chung
South Korea’s chaebols (image courtesy of Peter Schrank – economist.com)
Both economic researchers and financial analysts alike have documented the existence of a “Korea Discount.” The term refers to the low equity values of South Korean firms in relation to those in comparable capital markets (i.e. Japan, Taiwan, Singapore). In the past, researchers have suggested that the Korea Discount was a result of the perennial threat and instability of North Korea. Other theories have suggested that the South Korean economy is over-reliant on exports in cyclical industries, or that the capital structures of Korean firms are too debt-heavy. However, upon witnessing very little change in both the KOSPI and the Won following the news of Kim Jong Il’s death, researchers have posited a new theory – that the Korea Discount is a result of the poor corporate governance found in the family-run chaebols.
Wireless Peninsula 