[Deep Dive] The Value-up Program Dilemma: Rising Market Volatility and Policy Effectiveness

Introduction

The 'Corporate Value-up Program,' launched to resolve the chronic undervaluation of the Korean stock market, faces a critical test amidst macroeconomic uncertainty. As of August 2026, the elevated market volatility, coupled with a global sell-off, is raising questions about the policy's short-term defensive capabilities. Contrary to the initial intent of stabilizing stock volatility by reducing information asymmetry between companies and investors, the actual market is demonstrating a mixed landscape of sector concentration and institutional side effects.

Limitations of Short-term Price Rallies and Sustainability

During the initial phase of Value-up disclosures, participating companies saw a meaningful upward curve in their Price-to-Book Ratios (PBR). Immediately following the voluntary announcement of corporate value enhancement plans, these stocks temporarily outperformed the broader market. However, this excess return has largely proven to be a short-term phenomenon.

• Lack of Specificity: A minority of companies that specified shareholder return plans with concrete figures and execution timelines successfully defended their share prices. Conversely, those that offered only declarative and vague plans surrendered all initial gains during the recent market downturn.
• Divergence from Fundamentals: Promises of increased dividends without accompanying actual profit growth or improvements in Return on Equity (ROE) exposed their limitations, failing to withstand strong selling pressure during periods of heightened market volatility.

The Kosdaq Paradox: Stricter Delisting Requirements and Market Fear

The 'capital market purification' initiative, promoted as part of the Value-up Program, is generating unintended side effects in the Kosdaq market. Delisting requirements, including market capitalization criteria, were significantly strengthened with the intent of removing marginal companies and improving overall market soundness.

However, as overall market valuations have compressed due to the recent global market correction, even fundamentally sound mid-to-small-cap stocks are finding their listing status threatened due to failing to meet the newly elevated market cap thresholds. This has severely dampened investor sentiment within the Kosdaq market and is accelerating a polarization effect, where capital is concentrated solely in large-cap blue chips to avoid risk.

Structural Tasks for Ensuring Effectiveness

The current concerns of institutional and foreign investors are not aimed at the direction of the Value-up Program itself, but rather at its failure to provide strong structural incentives capable of offsetting macroeconomic volatility. While many listed companies are participating in the disclosures, the actual enhancement in corporate value perceived by the market remains low.

Legislating Tax Benefits and Incentives

To induce substantive and continuous corporate participation, specific tax benefits, such as separated taxation on dividend income or corporate tax reductions, must be finalized through legislation. Only when clear tax guidelines are established beyond political disputes can the market expect a stable mid-to-long-term inflow of foreign capital.

Strengthening Board Accountability and Corporate Governance

Moving beyond the simple distribution of free cash flow, there must be a fundamental improvement in corporate governance that legally clarifies the board's fiduciary duty to shareholders and protects the proportional interests of minority shareholders. This is the core prerequisite for building the fundamental strength of the Korean stock market, making it resilient to external macroeconomic shocks.

The recent spike in market volatility serves as a stress test, revealing the vulnerabilities of the Value-up Program. To restore structural trust in the market, comprehensive execution—combining predictable tax incentives and rigorous corporate governance reform—is required, moving beyond mere declarative policies.