Supplementary measures for the 'stock price suppression prevention law,' which prevents major shareholders from intentionally lowering stock prices to reduce inheritance taxes, are being proposed consecutively by the ruling Democratic Party. This is interpreted as a result of President Lee Jae-myung's recent directive to the Ministry of Economy and Finance to conduct a comprehensive review of their plans. Following changes to listed stock valuation criteria and activation of hostile mergers and acquisitions (M&A), this time an opinion has been presented to consider dividend payout ratios.
According to ruling party officials on the 31st, Rep. Lee Jung-moon, the ruling party secretary of the National Assembly's Committee on Culture, Sports, and Tourism, will soon introduce an amendment to the Financial Investment Services and Capital Markets Act with such content. He is known to have been preparing this bill since around May, as he was a member of the Political Affairs Committee in the first half of the 22nd National Assembly. This is the first time that shareholder return indicators are being used as the standard for the stock price suppression prevention law.
The procedural core of Rep. Lee's bill is an attempt to filter out companies that suppress stock prices using three 'nets.' The first condition is when the price-to-book ratio (PBR) remains below 1 for two consecutive business years or more. Next, it considers cases where the average return on equity (ROE) for two business years is 5% or more, and the dividend payout ratio for two business years is less than 10%. These are indicators showing the profit rate earned by companies using their equity capital and how much of such profits are distributed to shareholders, respectively.
Under the amendment, companies that meet these three conditions are required to disclose corporate value enhancement plans including target dividend payout ratios and standards for calculating cost of equity (COE), as well as their implementation status. Prior to President Lee's directive for review, Rep. Kim Hyun-jung of the Democratic Party, whose bill was introduced earlier, defined the standards for plan disclosure as PBR less than 1x, and this reflects feedback that the scope should be narrowed considering industry-specific characteristics.
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Rep. Lee So-young's stock price suppression prevention law is also facing a situation where its momentum will be weakened by the nomination of that representative as minister of small business and venture capital.
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Well, since Lee So-young left, the momentum will certainly drop. I hope they're not bringing back the original Blue House plan again, are they?
▶ Source: https://news.nate.com/view/20260831n22093?mid=n0203
