Regulators accelerate delisting of underperforming firms to further boost stock market

The Korea Exchange Seoul office in the financial district of Yeouido / Yonhap

Financial authorities are accelerating efforts to delist underperforming companies to further boost the stock market, with the benchmark KOSPI having surpassed a record 3,400 points, according to the Korea Exchange (KRX) Tuesday.

It said a total of 62 companies have been delisted from KOSPI so far this year.

This figure has already surpassed the 60 removals recorded in 2023 and is nearing the 69 reported for the entire year of 2024, indicating an accelerating pace of company exits from the market.

The number of listed firms flagged as “at-risk” ahead of potential removal has reached 55 for the year, as financial regulators tighten oversight of businesses with poor management or those failing to meet listing requirements.

This sharp rise in delistings is expected to continue as standards for firms on the KOSPI and secondary bourse Kosdaq become more stringent in the coming years.

For instance, the minimum market capitalization required to remain listed on the KOSPI will increase from the current 5 billion won ($3.62 million) to 50 billion won by 2028.

The sales requirement will also rise from 5 billion won to 30 billion won by 2029.

For companies listed on the Kosdaq, the minimum market cap requirement will increase from 4 billion won to 30 billion won, while the sales threshold will rise from 3 billion won to 10 billion won.

Audit-related rules have also been tightened.

KOSPI-listed companies that receive a “disclaimer of opinion” or other adverse audit result for two consecutive years will now face immediate delisting.

The grace period for companies to improve their standing has been shortened from four years to two years for KOSPI-listed firms.

For those listed on the Kosdaq, the eligibility review process will be simplified from three stages to two to speed up the removal of underperforming firms.

The grace period on the Kosdaq will also be reduced, from two years to one and a half years.

“We will continue to remove companies that fail to meet the standards,” said an official from the Financial Services Commission, the country's top financial regulator.