Corporate Korea’s Buybacks Rarely Benefit Investors, New Data Shows (Yonhap)
SEOUL, Dec. 3 (Korea Bizwire) — A majority of South Korean companies that repurchased their own shares over the past five years did so under the banner of “enhancing shareholder value,” but most of those shares were ultimately used to protect management control or meet internal financial needs, not to benefit investors, according to new industry data.
A study released Tuesday by Leaders Index found that roughly 20 percent of listed companies bought back shares each year from 2019 to 2024. Of the 2,067 regulatory filings outlining buyback plans during the period, 93.7 percent explicitly cited “shareholder value enhancement” as the purpose.
But disclosures on how those shares were later used tell a different story. Among 1,666 filings detailing the actual disposition of treasury shares, 64 percent went toward employee compensation programs. Another 11.3 percent were sold to raise cash, 10.3 percent supported the issuance of exchangeable bonds, and 4.9 percent were used in stock-swap transactions.
Analysts said the findings show that buybacks often served managerial and financial motives — such as securing friendly stakes or funding mergers and acquisitions — rather than boosting shareholder returns.
Leaders Index pointed to DreamCIS, a Kosdaq-listed firm that repurchased 200,000 shares in 2021 claiming a commitment to shareholders, then used the entire amount for acquiring other companies’ shares, employee bonuses, and investment funding.
Share cancellation, a measure that directly boosts shareholder value by reducing share count, also remained limited. Of 880 companies that conducted buybacks in the past five years, only 35.8 percent canceled any shares, and just 15 firms accounted for half of all cancellations.
Leaders Index said the findings highlight why lawmakers are moving to tighten rules governing treasury shares. A pending third amendment to the Commercial Act, expected to pass the National Assembly this year, would restrict the use of treasury shares as a tool for defending management control — a change that could force many companies to unwind large holdings accumulated under the current system.
M. H. Lee (mhlee@koreabizwire.com)
