Up to 220 Listed Companies to Be Labeled "Low PBR" Starting in November... Disclosure Criteria Explained

Public Disclosure of Low-PBR Companies (Naming & Shaming)

KOSPI: Bottom 25% of Industry PBR for Three Consecutive Years

KOSDAQ: Bottom 10% of Industry PBR for Three Consecutive Years

Exemption Available Upon Disclosure of Low-PBR Improvement Plans

On the KOSPI market, companies that are in the bottom 25% of their industry for price-to-book ratio (PBR) for three consecutive years, as well as companies on the KOSDAQ in the bottom 10% of their industry for PBR for three consecutive years, will be classified and publicly disclosed as low-PBR companies starting in November. Based on these criteria, it is expected that approximately 120 to 220 listed companies will be labeled as "Low PBR" stocks.

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Three consecutive years of low industry PBR to be disclosed... Bottom 25% for KOSPI, bottom 10% for KOSDAQ

The Financial Services Commission announced on the 29th the detailed standards for public disclosure of low-PBR companies, in cooperation with the Korea Exchange. This system was introduced as part of the capital market reform plan unveiled in March, aiming to encourage companies to enhance shareholder value by publishing a list of low-PBR companies.

The first list of low-PBR companies will be released on November 2. The disclosure will occur on the first trading day of May and November each year. According to the criteria, KOSPI companies that are in the bottom 25% of their industry for PBR in each of the past six consecutive half-year periods (three years), and KOSDAQ companies that are in the bottom 10% for the same period, will be included. The Financial Services Commission’s simulation estimates that approximately 120 to 220 listed companies will be publicly designated as low-PBR companies.

Previously, companies in the bottom 20% of PBR for one consecutive year in either the KOSPI or KOSDAQ were subject to disclosure. However, to accommodate factors such as boom-bust cycles in specific industries and the time required for investment outcomes to materialize, the review period was extended to three years. In addition, unlike KOSPI—which attracts more attention from the market regarding financial metrics such as PBR—KOSDAQ is composed primarily of technology and venture-oriented companies, so the criteria have diverged. To reflect industry-specific characteristics, the Global Industry Classification Standard (GICS), which separates 11 sectors including Energy, Materials, and Industrials, will be used in PBR calculation.

PBR will be assessed every half-year. PBR is calculated based on net assets and market capitalization, with net assets drawn from annual and semiannual reports. For market capitalization, the benchmark will be the average market cap over roughly one month, starting from the figure seven trading days before the first trading day of May and November (the disclosure dates). This approach is adopted to avoid distortions that may occur if only the market cap on a specific date is used.

The system is also designed to prevent companies from temporarily exiting the list due to a short-term increase in PBR. If a company exceeds the threshold in just one out of six half-year periods, the PBR for seven cumulative half-years will be considered.

Exemption available upon disclosure of PBR improvement plans... No exemption for six consecutive years as a low-PBR company

There is a one-year exemption for companies that publicly disclose detailed plans to improve their PBR and corporate value. To deter perfunctory disclosures, companies receiving the exemption must provide a comprehensive report that addresses the cause, analysis, target setting, improvement plan, and follow-up evaluation according to a prescribed format. The disclosure must be completed before the PBR assessment reference date.

However, companies whose PBR remains below the threshold for 12 consecutive half-years (six years) are not eligible for the exemption. If a company surpasses the threshold in just one of the 12 half-years, the decision on exemption eligibility will be based on the PBR over a 13-half-year period.

To prevent market participants from identifying disclosure targets before the introduction of the system, the continuity of PBR will not be considered during the initial round of disclosure. At this time, companies will be excluded from the low-PBR list if their calculated PBR is above the industry’s bottom 25% for KOSPI or bottom 10% for KOSDAQ.

The list of low-PBR companies will be released on the Korea Exchange’s public disclosure website. In addition, “Low PBR” tags will be attached to the names of relevant companies in securities firms’ home trading systems (HTS) and mobile trading systems (MTS).

The Financial Services Commission plans to gather opinions on amendments to the Korea Exchange rules and regulations for operating the low-PBR corporate disclosure system through August 24. If amendments are approved in September, the first public disclosure is scheduled for November 2.

This content was produced with the assistance of AI translation services.