A total of 52 companies have been delisted from the KOSDAQ market following substantive reviews over the past five years, prompting calls for investors to exercise greater caution when evaluating small-cap stocks.
According to Korea Exchange data released Wednesday, 172 KOSDAQ-listed companies triggered substantive review proceedings during the five-year period. Embezzlement and breach of fiduciary duty accounted for the largest share at 46 companies (26.2%), followed by disclosure violations at 27 companies (15.6%) and suspension of primary business operations at 22 companies (13.1%).
Of these, 52 companies were ultimately delisted following substantive reviews. The primary grounds for delisting were embezzlement and breach of fiduciary duty at 18 companies (28.5%) and disclosure violations at 14 companies (22.2%).
Companies involved in embezzlement and breach of fiduciary duty cases frequently exhibited warning signs including frequent management changes, weakening business operations, aggressive expansion into new ventures, and loans to affiliated entities, the exchange's analysis showed. Firms that compromised management transparency faced stricter scrutiny, resulting in higher delisting rates.
Disclosure violations typically involved companies that reversed announcements of major shareholder changes, abandoned fundraising plans such as rights offerings, or failed to fulfill large-scale supply contracts. Many of these companies demonstrated vulnerabilities in business continuity and management transparency.
"Starting July this year, requirements for disclosure violations as grounds for substantive review have been strengthened, so investors must verify the disclosure violation history of companies they consider investing in," Korea Exchange said.
Under the revised standards taking effect in July, the threshold for triggering a substantive review will be lowered from 15 accumulated penalty points for disclosure violations over the past year to 10 points. Complete capital impairment at the semi-annual period-end will also be added as grounds for substantive review. Analysts say investors need to make careful investment decisions that comprehensively consider companies' financial conditions and potential for large-scale losses.
"We plan to focus on the swift delisting of insolvent marginal companies to restore the soundness of the KOSDAQ market," Korea Exchange said. "We will also do our best to protect investors by continuously providing information on investment cautions."