Korea Value-Up Program: Can It Finally Close the Korea Discount?

For thirty years, the Korea Discount has been the single biggest story in Korean equities — and the single biggest frustration. The Korea Value-Up Program is the most serious attempt yet to actually do something about it. But can it work?

What is the Korea Value-Up Program?

Launched in early 2024 by Korea’s Financial Services Commission (FSC), the Corporate Value-Up Program is a government-led initiative to pressure Korean listed companies into improving capital efficiency, governance, and shareholder returns.

The pitch is simple: Korean companies trade at deep discounts to global peers because they hoard cash, return little to shareholders, and have opaque governance. The Value-Up Program asks them to fix this — voluntarily, but with strong nudges from the government and stock exchange.

The four pillars

The program is built on four core ideas:

1. Voluntary disclosure — Companies publish “Value-Up plans” detailing how they’ll improve ROE, payout ratios, and capital efficiency.
2. Tax incentives — Reduced taxes on dividends and share buybacks for participating companies.
3. Index recognition — A new “Korea Value-Up Index” tracks companies making real progress. Inclusion drives institutional buying.
4. Investor engagement — Foreign and domestic institutional investors are encouraged to push management on these issues.

Why now? The Japan blueprint

The Value-Up Program didn’t emerge in a vacuum. It was directly inspired by Japan’s Tokyo Stock Exchange (TSE) reforms launched in early 2023.

Japan’s situation was strikingly similar: decades of low valuations, cash-hoarding companies, weak shareholder returns, and a market that consistently traded below book value. In 2023, the TSE announced that companies trading below 1x price-to-book would need to disclose improvement plans or face delisting risk.

The result? The Nikkei broke through 30-year highs in 2024. Japanese companies announced record buybacks. Foreign capital flooded in. The “Japan reform trade” became one of the best-performing strategies of 2024.

Korea’s policymakers watched closely. The Value-Up Program is essentially Korea trying to replicate Japan’s playbook — but with several important differences.

Korea vs Japan: similarities and differences

Where they’re similar

• Both have persistent discount valuations to U.S. peers
• Both have export-heavy, cyclical economies
• Both have cultural barriers to aggressive shareholder return
• Both have governments now actively pushing for reform

Where they differ

Corporate structure: Japan has the keiretsu system (loose alliance of companies), while Korea has chaebols (tightly family-controlled conglomerates). Chaebol governance is harder to change because founding families resist losing control.

Activist pressure: Japan has welcomed foreign activist investors (Elliott, ValueAct) pushing reforms. Korea has historically been more resistant — though that’s slowly changing.

Mandate strength: The TSE’s “disclose or face delisting” was a real threat. Korea’s Value-Up Program is softer — incentives rather than penalties. Some critics say this won’t be enough.

What’s actually happening

Two years in, the results are mixed but encouraging.

The wins

• KOSPI rallied sharply in 2025 — outperforming most global indices. Korea finally got a real re-rating moment.
• Record buybacks announced — Samsung committed to its largest buyback program in history. SK Hynix, Hyundai, KB Financial, and others followed.
• Dividend hikes — Many large-caps raised payout ratios meaningfully for the first time in years.
• Foreign inflows — Foreign ownership of Korean equities hit multi-year highs as global investors started buying the “Korea reform trade.”
• Value-Up Index launched — Late 2024 saw the official launch of the index, with ETFs tracking it now available in Korea.

The concerns

• Voluntary participation is uneven — Many small and mid-cap firms haven’t filed Value-Up plans. The biggest gains have been concentrated in megacaps.
• Chaebol structures unchanged — Cross-shareholdings and family control remain largely intact. Structural governance issues persist.
• 2025 rally driven by AI, not reform — Skeptics argue Korea’s rally was mostly Samsung and SK Hynix riding the AI-memory boom, not Value-Up impact. Real test comes when AI tailwinds fade.
• No teeth — Without penalties for non-compliance, motivation to make hard governance changes is weak.
• Political uncertainty — A future Korean administration could de-prioritize the program.

How to play it

For U.S. investors interested in the Korea Value-Up thesis, several approaches:

Broad Korea exposure

The simplest play. Buy EWY or FLKR for KOSPI exposure. Both are heavily weighted toward Samsung, SK Hynix, and Hyundai — the companies most engaged with Value-Up. FLKR has much lower fees (0.09% vs 0.59%), making it the better long-term hold.

Targeted Value-Up plays

Some sectors are more affected than others:

• Financials — KB Financial, Shinhan, Hana — these were among the cheapest book-value names and have committed to large buybacks. ADRs available on NYSE.
• Holding companies — Traditional discount candidates as chaebol holdcos. Watch for restructuring announcements.
• Steel, chemicals, autos — Cyclical sectors trading at deep discounts that could re-rate on improved capital returns.

What to avoid

Companies that have explicitly resisted Value-Up plans, or whose controlling families have made it clear they prioritize succession over shareholder returns. These will continue trading cheap.

Will it work?

This is the trillion-won question, and the honest answer is: partially, and over multiple years.

The Japan playbook took roughly two years to start working in earnest. Korea is at year two now. The pattern should continue to play out into 2026–2028 if:

• Major chaebols continue announcing real shareholder returns
• The Value-Up Index gains institutional credibility and inflows
• MSCI eventually upgrades Korea to developed-market status (a big catalyst)
• Tax incentives are extended or strengthened
• Political continuity supports the program

If those things happen, the Korea Discount could meaningfully close over the next 3–5 years. That’s a multi-year tailwind for Korean equities — worth real attention from any global investor.

If they don’t — if the program loses momentum, families resist, or politics shift — Korea reverts to its old pattern: cheap valuations, cyclical rallies, perpetual discount. The structural drag returns.

The bottom line

The Korea Value-Up Program is the most credible attempt in a generation to fix Korea’s corporate governance and capital return issues. Two years in, the early results are real — record buybacks, rising payouts, a major 2025 rally — but the structural causes of the Korea Discount haven’t been fully addressed.

Whether the program ultimately succeeds depends on whether Korea’s largest companies and controlling families embrace shareholder return culture, or merely tolerate it temporarily. That’s a multi-year story, and we’re still in the early chapters.

For investors, the takeaway is straightforward: Korea is in the middle of its most interesting corporate reform period in decades. Whether you buy it or not, it’s worth paying attention to.