TWSE Market Insights

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With the continuous development of global financial markets, the demand for enhancing corporate value and capital market competitiveness in various countries has become increasingly urgent. In order to address the long-term undervaluation of the capital market, the South Korean government launched the “Corporate Value-up Program” in February 2024 which referred to the “Action to Implement Management That Is Conscious of Cost of Capital and Stock Price” launched by the Tokyo Stock Exchange (TSE) of Japan in 2023, and formulated a series of measures based on the characteristics of the South Korean market, aiming to promote the long-term value growth of listed companies through improving capital efficiency and enhancing corporate governance. At the same time, Taiwan is promoting the “Strengthening the Capital Market and Enhancing Market Value” plan, aiming to promote a more comprehensive development of the capital market by enhancing enterprise value, leading industrial development, and increasing enterprise exposure. This article will explore the background, measures, and capital market impact of the programs of South Korea and Japan, and provide corresponding suggestions for the plan of Taiwan.

(I) Solving the Current Problem of “Korea Discount”

In order to promote listed companies to enhance their corporate value, the Financial Services Commission of South Korea referred to the “Action to Implement Management That Is Conscious of Cost of Capital and Stock Price” launched by TSE in 2023, and launched its “Corporate Value-up Program” on February 26, 2024 to encourage listed companies to voluntarily disclose their Corporate Value-up Programs. The Korea Stock Exchange (KRX) also released relevant guidelines on May 27, 2024, aiming to address the long-term undervaluation of the Korean capital market, known as the Korea Discount.

(II) The Stock Price to Book Ratio of the South Korean Stock Market Has Been Consistently Lower Than Those of Other Major Countries’ Stock Markets

The focus of the “Corporate Value-up Program” launched by South Korea this time is to examine the low capital efficiency of its overall market (including KOSPI and KOSDAQ). Among the number of South Korean companies with a price to book ratio (PBR) of less than 1 at the end of 2023, KOSPI (mainly large enterprises) accounts for 65.8% and KOSDAQ (mainly small and medium enterprises) accounts for 33.8%.The average price to book ratio of South Korean listed companies in the past decade is only 1.04 (as shown in Chart 1), indicating that their listed stock trading prices are almost equivalent to their book value, and lower than those of listed companies in other major economies (3.64 in the United States, 1.4 in Japan, and 2.07 in Taiwan). In addition, the average price to earnings ratio (PER), return on equity (ROE), and dividend payout ratio (DPR) of South Korean companies in the past decade are not as good as those of listed companies in other major economies. This suggests that the overall market of South Korea is undervalued.

Chart 1: Average Financial Ratios of Listed Companies in Various Countries over the Past Decade

Unit %	South Korea	Taiwan	China	USA	Japan	India
Return on equity (ROE)	7.98	13.58	11.48	14.85	8.34	12.80
Price to book ratio (PBR)	1.04	2.07	1.50	3.64	1.4	3.32
Price to earnings ratio (PER)	14.16	15.95	13.09	21.78	16.86	25.62
Dividend payout ratio (DPR)	26	55	31.3	42.4	36.0	38.5
Source: Financial Services Commission of South Korea

In order to support South Korea’s listed companies in independently enhancing their corporate value, the South Korean government released in February 2024 the “Corporate Value-up Program.” According to the press release of the Financial Services Commission of South Korea on February 26, the purpose of this program is to encourage listed companies to develop, disclose, and implement their corporate value-up programs, and help investors make investment decisions based on the information disclosed by the companies, in order to promote the healthy growth of the capital market and enhance corporate value. The release of the Guidelines for Corporate Value-up Plan will guide companies in developing key indicators, and setting medium and long-term goals and specific plans as useful guidelines for companies to formulate their own Corporate Value-up Programs. At the same time, government and related departments will support companies in enhancing their value through tax incentives, the compilation of the Korea Value-up Index (including promoting the listing of ETFs tracking the index), and the issuing of corporate value-up rewards. The program consists of three pillars: the first pillar is to assist listed companies in preparing, implementing, and communicating their Corporate Value-up Programs, the second pillar is to assist investors in making informed evaluations and investments in companies that demonstrate significant improvement or high value, and the third pillar is to establish a dedicated system to support the implementation of their Corporate Value-up Programs.

The first pillar includes providing a set of guidelines to support listed companies in voluntarily disclosing their Corporate Value-up Programs and offering incentives, in order to encourage their voluntary participation. The guidelines disclose information on the main features of the Corporate Value-up Program, the content required for the program, and how to disclose the program to assist companies in voluntarily preparing, implementing, and communicating their own Corporate Value-up Programs. It is also expected that the Corporate Governance Code will be revised to incorporate relevant program content. In addition, the government will explore a series of tax incentives and related benefits to motivate listed companies to enhance their corporate value and increase the return to shareholders. Companies selected as having high corporate value or significant value enhancement will receive awards and enjoy preferential treatment in tax policies.

The second pillar is to help investors evaluate the company’s efforts and effectiveness in enhancing its corporate value, thus enabling investors to make better informed investment decisions. KRX will compile the “Korea Value-up Index” composed of best-practice companies, in order to facilitate institutional investors including pension funds to use it as an index for investment. It is also expected to launch ETF products that track the Korea Value-up Index, making it easier for retail investors to invest in such companies. The Due Diligence Governance Code for Institutional Investors will also be revised to ensure that institutional investors include the value enhancement of listed companies in their investment evaluation. In addition, KRX will summarize data from its market data system, and publish by market and industry category its listed companies’ major financial indicators, such as the price to book ratio, price to earnings ratio, return on equity, earnings distribution ratio and yield, in order to facilitate investors’ comparison.

The third pillar is that a dedicated support system will be established to assist in the implementation of the Corporate Value-up Program in the medium to long term. KRX will establish a dedicated department and set up an advisory committee to support the improvement and updating of the Corporate Value-up Program. KRX will also launch a webpage to help investors easily access various information about the Corporate Value-up Program, such as the disclosure status of the Corporate Value-up Program, and will provide various assistance programs to encourage active participation of companies, including disclosure training for listed companies, business consulting and English translation services for small and medium enterprises, as well as the joint handling of investor relations and online advocacy services.

Starting in 2025, the Financial Services Commission of South Korea will also present the Corporate Value-up Award in May each year, and announce relevant incentive measures on February 26 and April 2 respectively to attract companies to participate in this program. The award measures for the winning companies are as follows：

(I) Taxation and Accounting

• There are types of tax incentives, such as priority selection as model taxpayers, quick tax reporting (including R&D tax deduction pre-approval services, corporate tax break consultation, and value-added tax or corporate tax filing), and family business inheritance consultation.
• The competent authority will examine whether to grant exemptions when regularly designating external auditors for listed companies, in order to reduce the burden on the companies.
• Moderately reduction of penalties for violations.

(II) Listing and Disclosure

• Waiver of exchange annual fees.
• Waiver of additional listing fees or fees for changes.
• The penalties and measures by the KRX for reduction or postponement of false disclosure. 

(III) Expansion of Investment

• Priority opportunities to participate in various exchange meetings to enhance relationships with investors.
• Priority inclusion in the Korea Value-up Index.

Since the first joint seminar on February 26, 2024, KRX has collected opinions from domestic and foreign institutional investors (securities firms, asset management companies, etc.), listed companies, and corporate value-up consultants over a period of three months, and finally determined the content of the Guidelines. On May 27, 2024, KRX released the “Guidelines for Corporate Value-up Plan” and launched a corporate value-up website to support listed companies in actively participating in the Corporate Value-up Program and providing support for investment decisions.

(I) Main Features of the Voluntary Guidelines for Corporate Value-up Plan

1. Voluntary：The participation in the development and disclosure of the Corporate Value-up Program is determined by the company itself, and the voluntary nature applies not only to the company’s decision on whether to participate in the program but also to the details it chooses to include in the program, such as the performance indicators it wishes to focus on or the time frame for program implementation. However, in order to enhance corporate value and obtain a fair market evaluation, the company needs to actively participate in the formulation, disclosure, and implementation of the program, and maintain continuous communication with the market.
2. Future-oriented：The scope of existing corporate disclosure is usually retrospective, mainly including facts and results that have been executed (financial status, audit results, etc.) and decisions that have been made (capital increase/reduction, investor relations decisions, etc.)The main difference between the Corporate Value-up Program and the existing disclosure lies in its forward-looking nature, which not only states the company’s past and present situation, but also includes future plans and positive efforts to enhance corporate value in the medium and long term.
3. Comprehensive：The Corporate Value-up Program is a comprehensive report that focuses on enhancing corporate value, and integrating scattered company data disclosed in the annual report, corporate governance report, and other major business matters. These enable a company to analyze its current situation from a more comprehensive perspective, and formulate goals and plans to achieve these goals; accordingly the company may showcase its current situation and future vision to shareholders and market participants.
4. Choose and Focus：The Corporate Value-up Program does not state every detail, but encourages companies to consider their individual characteristics such as industry and structure, in order to focus on areas that are most meaningful for enhancing corporate value and require communication with shareholders and market participants. Although it comprehensively integrates corporate information from all aspects, when deciding on the focus and selection of specific details, the company should consider individual characteristics to select the areas that need to be emphasized.
5. Responsibility of Board of Directors：When developing the individual Corporate Value-up Program, although it is not mandatory for the board of directors to report, review, or vote, active participation from the board is required as it plays a decision-making role in corporate management. In addition, when developing the company’s Corporate Value-up Program, if the board of directors conducts relevant reporting, reviews or voting, these details, such as board meeting dates and discussion content, may be included to enhance the credibility of the program.

The Chairman of KRX emphasized that after communicating with various market participants, KRX attaches great importance to the “voluntary” and “choose and focus” aspects in the guidelines. He calls on relevant authorities in the capital market to cooperate, and encourages listed companies to voluntarily develop and implement programs that best suit their individual characteristics and conduct communication, in order to quickly have the Corporate Value-up Program integrated into their corporate culture, and enable the South Korean capital market to receive proper evaluation. In addition, the Chairman of KRX also emphasized the responsibility of the board of directors, believing that as the responsible mechanism for corporate management, the board of directors should play an active role in the Corporate Value-up Program.

(II) Disclosure Recommendations by the Guidelines for Corporate Value-up Plan

1. Department for Planning and Management：As the Corporate Value-up Program is most likely to involve business or management planning, it is best for the management strategy department or finance department within the company to be responsible for developing the program. In addition, considering the importance of the program and the responsibility of the board of directors, the board of directors is encouraged to actively participate in the appropriate development and implementation of the program for supervision.
2. Disclosure Method and Timeline：The Corporate Value-up Program belongs to the voluntary disclosure category, and the company needs to submit the program content through the Korea Investor’s Network for Disclosure System (KIND) of KRX, and KRX recommends uploading the program regularly, such as once a year. In addition, to improve data accessibility to foreign investors, it is recommended to provide an English version of the disclosure.
3. Disclaimers for Disclosure Method and Details：

1.) Reporting through KIND

The Corporate Value-up Program may be information that requires fair disclosure, which means that disclosure on the KIND system should take precedence over any announcements on official company websites to ensure compliance with relevant procedures.

2.) Prohibition of False Disclosure Method and Details

The Corporate Value-up Program belongs to the voluntary disclosure category, and if there is false disclosure, the market manipulation provisions of the Capital Markets Act may apply to prevent unfair transactions through false information reporting. However, as the goals and implementation of the program are often accompanied by predictions of changes in management performance and financial conditions, companies should not be considered as making dishonest disclosures or unfair transactions simply because they have not achieved their goals or made inaccurate predictions.

3.) Corrections & Additions to Disclosure

In situations where it is necessary to correct previously submitted disclosures, such as discovering errors in previous disclosures or significant changes in business or management plans, corrections or supplements should be made through corrected disclosures, and the reasons and details of the corrections should be provided.

(III) Disclosure Content of South Korea’s Guidelines for Corporate Value-up Plan

1. Company Overview：Basic information of the enterprise (such as business scope, history, major products and services, and financial performance) should be explained in detail to enhance market participants’ understanding.
2. Current Status Analysis

1.) Business Status Analysis

In order to select appropriate key indicators for corporate value enhancement and develop specific implementation plans, a multi-faceted and multidimensional review of business conditions should be conducted, including analysis of business models, market environment, and company competitiveness.

2.) Selection of Indicators

Companies should select indicators related to their medium and long-term value enhancement based on industry characteristics, business structure, growth stage, interests of shareholders and market participants. Non-financial factors are also important for considering the medium- to long-term corporate value enhancement, especially “corporate governance,” which is one of the most representative non-financial factors and has been pointed out as one of the factors causing low corporate valuations of the South Korean stock market.

3.) Analysis of Indicators

Through various indicator analyses, such as time series analysis, industry averages or comparisons with competitors, as well as detailed analysis of departments (such as department category and operating region), recent trends, competitive advantages, disadvantages, and related reasons can be identified.

     3. Goal Setting

Based on the analysis of the current situation, companies may set goals for corporate value enhancement from a medium- to long-term perspective to reflect respective situations. Companies should propose goals in a quantitative form, but may also provide qualitative goals as needed. In addition, when setting financial goals, not only simple numbers may be used, but target periods or numbers may also be set within certain ranges, such as the percentage of ROE growth that can be achieved continuously in a certain number of years.

     4. Planning

The specific plan for achieving the goals should be explained in detail. Companies may develop various plans to achieve the goals based on their respective situations, including investing in manpower or resources, expanding research and development, restructuring business, and increasing the return to shareholders. Companies should appropriately explain the basis, risk factors, and content of each stage of plan implementation to make the plans more reasonable.

     5. Implementation Evaluation

It is recommended to regularly (e.g. once a year) disclose the plan and analyze the implementation results of the previous plan, evaluate the parts that have been done well and those that need improvement, and reflect these results when developing new plans.

     6. Communication

For the convenience of investors’ understanding, it is recommended to describe all details in the communication section at once, rather than dispersing them in other parts of the plan. Companies should include the status of communication with shareholders and future communication plans.

TSE originally had four market departments, namely Department 1, Department 2, Mothers, and JASDAQ, which were retained due to the organizational integration between TSE and the Osaka Securities Exchange in 2013, but also resulted in unclear positioning of each market segment, thus causing investors to face more uncertainty when making investment decisions, weakening the attractiveness of each segment, and failing to provide sufficient incentives for listed companies to continuously enhance their corporate value.

To enhance corporate value, TSE conducted research on market restructuring and reorganized the market into three main market segments, namely Prime, Standard and Growth, on April 4, 2022. In order to improve the effectiveness of the market segment restructuring, TSE established the “Council of Experts Concerning the Follow-up of Market Restructuring” in July 2022 to continuously improve relevant measures and enhance investors’ evaluations. The council discussed measures related to enhancing corporate value, optimizing regulations, and providing start-up capital for listed companies. In January 2023, TSE released a “Summary of Discussions on Measures to Improve the Effectiveness of the Market Restructuring” to summarize the discussions of the expert committee at that time and propose future action plans.

On March 31, 2023, TSE announced measures related to “Action to Implement Management That Is Conscious of Cost of Capital and Stock Price,” “Better Dialogue with Shareholders and Related Disclosure” and “Using ‘Explain’ to Contribute to Constructive Dialogue,” and these measures aim to encourage listed companies to respond to the results of expert committee discussions on market restructuring follow-up. The following is a brief introduction to the relevant measures.

(I) Action to Implement Management That Is Conscious of Cost of Capital and Stock Price

According to Article 5.2 of Japan’s Corporate Governance Code, managers need to consider the cost of capital to ensure that the cost of capital and profitability are fully considered in resource allocation, in order to meet the expectations of investors and other stakeholders, and achieve sustainable growth and corporate value enhancement in the medium to long term. However, according to statistics, about half of the companies listed on Prime and 60% on Standard have ROE below 8% and PBR below 1. The “Council of Experts Concerning the Follow-up of Market Restructuring” believes that this shows Japanese companies have problems with their profitability and growth potential, and it is necessary to reform management thinking. Therefore, TSE requires all companies listed on Prime and Standard to take action to provide guidance on the evaluation of current conditions, policies and goals, planning and implementation schedules, etc. to ensure the quality of corporate information disclosure, and to demonstrate their progress to investors. For companies that do not meet certain standards, they should propose plans to improve their ROE or PBR and publish a list of undisclosed plans. TSE recommends that companies take actions in the following three stages:

Stage 1：Analysis of Current Situation

• Obtain a correct understanding of the cost of funds and profitability based on financial statements.
• Develop and disclose improvement plans by analyzing and evaluating the current situation and board discussions, and then explain the progress through communication with investors.
• Whether the company has achieved profitability beyond its cost of capital; if not, the reasons need to be analyzed. Companies can compare the return on invested capital (ROIC) with the weighted average cost of capital (WACC), or compare ROE with cost of equity, and conduct a separate profitability analysis for each business unit.
• Even if the company has achieved the goals above, if the market valuation is not high (such as PBR still below 1), the reasons need to be explored, and it may indicate that investors have insufficient expectations for the company’s future growth potential. Companies can further analyze the changes in relevant financial indicators and compare them with peers, in order to have a more comprehensive understanding of their market positioning and investor expectations. These analyses and evaluations can help companies improve the quality of financial management and shareholder value.

Stage 2：Planning & Disclosure

• The board of directors shall establish basic management policies, and the management team shall fully examine the cost of funds and profitability to allocate resources reasonably, in order to promote sustainable growth. This may include promoting investment in research and development, increasing human resources, creating intellectual property rights and intangible assets, as well as restructuring business.
• Relevant policies, goals, and specific details shall be clearly presented in an appropriate manner to enable investors to evaluate their progress.
• Although TSE does not require companies to disclose the calculation results of their cost of capital, companies should explain their method of calculating the cost of capital and the logic behind it. In addition, for the analysis of profitability and market valuation, it is recommended to evaluate multiple years instead of being limited to a single year.
• Enterprise goals should be selected based on the specific situation of the company. When setting goals, a single goal or change rate (such as ROE or EPS growth rate) may be set. If PBR is lower than 1, it indicates that the company has not achieved profitability beyond its cost of capital, or investors do not see sufficient growth potential, and the company should set further improvement goals. If the company believes that its profitability and market valuation have reached sufficient levels, it can clearly indicate that no further improvement is needed.
• TSE expects companies to provide specific measures and implementation timelines to improve profitability and market valuation. In order to enhance investors’ evaluation of corporate growth potential, companies should disclose their businesses and investment directions, especially their continuous investment in intangible assets such as intellectual property rights. Furthermore, incorporating improvements in profitability and market valuation into the calculation of management compensation can provide an incentive for achieving sustainable growth.
• TSE emphasizes the flexibility and convenience in disclosing improvement policies and plans, aiming to make it easier for investors to access and understand relevant corporate information. This not only helps to improve market transparency, but also encourages companies to be more open and proactive in information disclosure. Although TSE does not specify the types or formats of documents to be disclosed, companies may disclose this information through various forms such as management strategy, management plan, financial report, or company website. Regardless of the form in which the information is disclosed, to facilitate investors’ search, companies should clearly state the information disclosed and how it is obtained (by providing the website URL, for example), and these can be explained in the “Disclosure in Accordance with Principles of the Corporate Governance Code” section of the corporate governance report.

Stage 3：Implementation of Initiatives

• Active engagement in dialogue with investors and performing gradual improvement; although TSE has not mandated a start date, it requests companies to respond as soon as possible.
• TSE requires listed companies to continuously promote and conduct progress analysis and update their disclosure at least once a year.
• Although adopting treasury stocks and increasing dividends are effective means to improve profitability, they still depend on whether the company’s balance sheet effectively promotes value creation. TSE expects companies to continue achieving profits and sustainable growth beyond their cost of capital, and does not expect companies to only use treasury stocks or increase dividends as a one-time measure to solve the problem.
• TSE expects companies to actively engage in dialogue with investors including overseas investors, which is in line with the principles of the Corporate Governance Code regarding dialogue with shareholders.
• TSE requires companies to update disclosure content at least once a year after analyzing the progress and results of measures. It expects companies to show the progress of current measures, progress toward achieving goals, dialogue with investors, and any changes to goals and measures. Although there is no specific timeline for the update, TSE expects companies to update the content promptly if there are significant changes to the disclosed program.

Although TSE did not propose to develop a related index in its action plan, it launched the JPX Prime 150 Index in July 2023. The index selects 150 companies recognized as representing Japan’s value creation from approximately 1,840 Prime listed companies, making the index and its constituent stocks medium- and long-term investment targets for domestic and foreign institutional and individual investors, thereby helping companies actively create corporate value and increase the attractiveness of the Japanese stock market. The index was launched as an ETF product by Nomura Securities in 2024.

In addition, TSE released the first phase of the capital utilization efficiency improvement report of listed companies on January 15, 2024, which divided all companies into “disclosure already made on how to improve,” “under discussion/considering how to improve,” and “disclosure not yet made on how to improve,” and released updated data as of the end of February 2024 on March 22. According to its statistics, 786 listed companies in the Prime market have announced their measures, accounting for approximately 48%, while 183 companies are discussing improvement measures, accounting for approximately 11%; 219 companies in the Standard market have announced their measures, while 129 are currently discussing improvement measures, and both of them account for approximately 22% in total. Among them, the disclosure progress of low PBR and high market value companies is relatively fast. TSE motivates listed companies to take action as soon as possible through “horizontal comparison” competition by publishing a list of companies.

(II) Improvement of Dialogue with Shareholders and Related Disclosures

General Principle 5 of Japan’s Corporate Governance Code stipulates that “In order to contribute to sustainable growth and the increase of corporate value over the mid- to long-term, companies should engage in constructive dialogue with shareholders even outside the general shareholder meeting. ” General Principle 5.1 of the Code also stipulates that “Companies should, positively and to the extent reasonable, respond to the requests from shareholders to engage in dialogue (management meetings) so as to support sustainable growth and increase corporate value over the mid- to long-term. The board should establish, approve and disclose policies concerning the measures and organizational structures aimed at promoting constructive dialogue with shareholders.”

The importance of dialogue with investors was once again emphasized in the “Council of Experts Concerning the Follow-up of Market Restructuring,” and the committee pointed out that some companies are still unwilling to participate in such dialogue. In order to promote it, TSE in response required Prime listed companies to make constructive dialogue a core task to enhance corporate value, and to disclose the dialogue between the management and investors as well as its content.

TSE suggests that companies disclose the content of its dialogue with investors, such as the parties communicated with, discussion topics, feedback, and follow-up measures. Although TSE has not specified any specific file type or format to disclose information regarding the dialogue between the management and shareholders, companies may disclose such information in its annual report or on its website. TSE also conducted interviews with over 90 domestic and foreign investors, and presented key points and examples on February 1, 2024 regarding their views and expectations of the improvement plan.

(III) Appropriate Use of “Explanations” to Promote Constructive Dialogue

The specific measures mentioned in the “Corporate Governance Code” are the best practices for achieving corporate governance goals. If a listed company believes that it is not suitable to comply with certain principles in its own circumstances, TSE allows the company to provide sufficient explanations for the reasons for non-compliance. In many cases, positive explanations are more desirable than superficial compliance. From this perspective, it is important for companies that choose to “explain” their practices and measures comprehensively to gain investors’ understanding.

The fact that when adopting the “Compliance or Explanation” based on the “Corporate Governance Code,” some companies only state that they are “under consideration” when explaining the reasons for their non-compliance, and have not updated it for many years, has made this mechanism lose its substantive significance. To address this issue, TSE released a document on March 31, 2023 to explain to listed companies as follows the key points to be aware of when writing explanations：

• Clearly identify which parts of the relevant principles have not been implemented.
  • Especially, if some parts of a principle have been implemented while others have not, please clearly indicate these parts.
• For the unimplemented parts, explain the reasons for the company’s non-compliance at this stage (why it is considered appropriate to be non-compliant) from the following perspectives：
  • Individual circumstances (e.g. industry, scale, business characteristics, organizational structure, and company environment)
  • If alternative measures have been taken, please provide a detailed explanation of these measures and why they are suitable for the company
• If the company plans to comply with relevant principles in the future, please provide a specific plan for explanation of the discussion and implementation in detail from the following perspectives：
  • The structure, methods, and processes of the discussion/work, as well as the factors being considered.
  • The progress of the discussion/work and the specific schedule to follow.
  • Detailed information on transitional measures to be implemented prior to compliance.

With the guidance of the government’s industrial policies and the assistance of the capital market, Taiwan has gradually developed into a technology island. The market value of the electronics industry has grown from 2% in the 1990s to 55% in 2000 and 67% in recent years, and a complete technology industry chain has formed. With sixty years of efforts and benefiting from industrial demands, the market value and transaction value of companies listed on the Taiwan Stock Exchange Corporation (TWSE) have been continuously challenging new highs.

The responsibility of TWSE is even greater in the face of the rising performance in terms of price and volume, as well as the steady growth in the number of listed companies and investors participating. In response to the trend of active new economy development in various countries, TWSE has added new categories of listed companies in 2023 and launched strategies to strengthen the development of the biotechnology industry, in the hope that through the power of the general board and the innovation board, Taiwan’s industrial development will be diversified and a new guardian angel for the country will be created.

In 2024, TWSE will make “strengthening the capital market and enhancing market value” one of its annual development priorities. The plan consists of three major strategies, namely “enhancing corporate value,” “leading industry development,” and “increasing corporate exposure,” and promotes the sound development of the capital market through ten principles (see Chart 2 for details).

In terms of the strategy of “enhancing corporate value,” TWSE plans to add a “Corporate Value-up Program” to the “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies” to guide listed companies to internalize the attention to shareholder value into their corporate culture, set up a special area on its website to disclose shareholder value giveback information and important financial indicators for investment that investors are concerned about, and encourage market makers to choose high-quality and low-liquidity stocks with PBR below 1 for market making quotes. At the same time, TWSE requires all listed companies to prepare a sustainability report by 2025, transition the corporate governance evaluation to ESG evaluation in 2026, and complete greenhouse gas inventory by 2027 and greenhouse gas assurance by 2029, in order to enhance corporate governance and disclosure of sustainability information, and promote corporate awareness of sustainability responsibility.

In terms of the “leading industry development” strategy, TWSE will focus on the development of new economy industries (such as green energy, digital and biotechnology) by enhancing the performance of capital market financing platforms and combining the strength of the general and innovation boards. The goal for 2024 is to promote the IPO percentage of new economy industries to 50%.TWSE will work together with the public sector and new venture ecosystem resources to form a “National Innovation Team” to assist in industrial transformation and upgrading, and promote the enhancement of Taiwan’s new economy status. In addition in order to expand opportunities for industrial chain cooperation and leverage the synergy of the big leading the small, TWSE will invite the heads of listed companies with good market value and profitability to hold the “Strengthening Taiwan’s Capital Market Summit” to promote cross-industry exchanges among enterprises through experience sharing on innovation and sustainability issues, and create new opportunities for cooperation. In 2024, TWSE will organize themed exchange activities for digital, green energy and biotechnology, as well as a large-scale “New Economy Industrial Chain Symposium” to invite units from upstream and downstream industries, ecosystems, venture capital, and IPO intermediaries to exchange ideas, in order to accelerate the growth and fundraising opportunities of new ventures.

In terms of the strategy of “increasing corporate exposure,” TWSE will work with Taiwan Index Plus (TIP) to establish an IR ESG engagement platform to support institutional investors and corporate ESG engagement information, and provide media services for the engagement of small and medium TWSE- and TPEx-listed companies and investors to deepen investor relations. TWSE will collaborate with international index companies or database institutions to expand Taiwan’s ESG thematic indices, increase corporate exposure, and encourage companies with a market value of over NT$10 billion to hold briefings for institutional investors at least twice a year to strengthen communication with investors.

Chart 2. TWSE’s “Strengthening the Capital Market and Enhancing Market Value”

Listed companies	Enhance corporate value Improve corporate governance and sustainable disclosure	Policy 1： Encourage companies to prioritize shareholder value. Policy 2：Improve sustainable information disclosure
TWSE	Guide industry development Lead the new economy with technology Promote the synergy of industrial cooperation	Policy 3：Lead the development of diversified industries with technology Policy 4：Increase industrial chain links
Investors	Enhance corporate exposure Encourage communication Strengthen investment attraction Value information disclosure	Policy 5：IR ESG engagement platform Policy 6：Encourage communication through briefings for institutional investors Policy 7：Enhance the efficiency of domestic and international investment attraction Policy 8：International cooperation in developing new ESG indices Policy 9：Optimize the information disclosure platform Policy 10：Strengthen the connotation of English information

Japan, South Korea and Taiwan share similarities in their enterprise value promotion plans, but there are also significant differences. These differences reflect the different priorities and strategies of the three countries in policy implementation and promotion direction.

(I) Main Similarities

1. Focusing on Enhancing Corporate Value：The three countries’ plans are all closely related to enhancing corporate value. South Korea and Japan require companies to pay attention to capital efficiency and review relevant financial indicators, in order to evaluate corporate value and whether the plan can achieve sustained and effective growth, while Taiwan not only guides listed companies to internalize shareholder value as their corporate culture, but also leads industry development and strengthens corporate exposure to achieve corporate goals.
2. Encouraging Voluntary Participation of Listed Companies：All the plans of these three countries emphasize voluntary corporate participation, and are not only limited to specific companies in these countries’ markets, such as those with a PBR less than 1. Both the Corporate Value-up Program of South Korea and the action plan of TSE encourage companies to voluntarily participate and develop and disclose value enhancement plans that meet their individual circumstances through voluntary evaluation of the current situation.
3. Emphasizing Investor Communication：All three countries emphasize that listed companies should recognize the importance of sufficient communication with shareholders. Japan’s Corporate Governance Code explicitly requires the improvement of dialogue with shareholders, while South Korea includes investor communication in the Guidelines for Corporate Value-up Plan; Taiwan plans to establish an IR ESG engagement platform to support ESG engagement information for institutional investors and enterprises, and provide engagement media services for small and medium TWSE- and TPEx-listed companies and investors to deepen investor relations.
4. Establishing Indices and Promoting ETF Products：Although Japan’s action plan does not include the promotion of related indices, TSE launched the JPX Prime 150 Index in mid-2023 to improve corporate value; South Korea will compile the Korea Value-up Index and promote ETF products; Taiwan will cooperate with international index companies or database institutions to expand Taiwan’s ESG thematic indices.

(II)   Main Differences

1. Differences in Specific Contents of the Plans

• Japan: Implement the “Action to Implement Management That Is Conscious of Cost of Capital and Stock Price” policy, with a focus on improving the efficiency of corporate capital utilization. In addition, the measures of TSE emphasize guiding companies to pay attention to the management of capital costs and stock price rationality through the principles of the Corporate Governance Code, and explaining the differences from the code through improved dialogue with shareholders and the use of “explanations.”
• South Korea: More specific and proactive measures have been taken to promote corporate value enhancement, and the government takes the lead in proposing detailed plans and incentive measures, including a series of tax incentives, rewards, and other related measures. KRX also provides detailed guidelines to guide companies to voluntarily take measures to enhance their value, and to reflect the content of corporate value enhancement in the due diligence governance code of institutional investors. 
• Taiwan: Taiwan promotes the plan of “Strengthening the Capital Market and Enhancing Market Value.” In addition to emphasizing corporate value enhancement, the government leads innovative development with technology, values cooperation among industries, and enhances communication with market participants, in order to achieve the goal of strengthening the value of Taiwan’s capital market.

     2. Differences in Disclosure Guiding Methods

• Japan: TSE does not require listed companies to disclose policies, improvement goals, specific measures, and implementation timeline in specific types of documents or formats, but companies must describe whether to disclose information on corporate value enhancement in their corporate governance reports. Furthermore, by measures such as regularly disclosing the list of companies that have not disclosed their action plans on their websites, TSE places certain pressure on the companies with no such information disclosed and encourages them to voluntarily adopt the action plan.
• South Korea: Companies need to submit the program content through the KIND system of KRX, and it is recommended to upload the program regularly, such as once a year. In addition, to improve the data accessibility to foreign investors, it is recommended to provide an English version of the disclosure content. Furthermore, KRX expects to compile relevant data (such as PBR and ROE) based on its “KRX Market Data System,” rank them by market and sector, and announce historical data for investors to compare.
• Taiwan: TWSE plans to add a “Corporate Value-up Program” to the “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies,” and set up a special area on its website to disclose shareholder value giveback information and important financial indicators for investment that investors are concerned about. In addition, in order to meet the needs of investors, a new and integrated IPO information disclosure area will be established in 2024, and the ESG database content will be expanded to enhance information transparency by improving the information disclosure channels and optimizing the user interface.

The “Action to Implement Management That Is Conscious of Cost of Capital and Stock Price” of TSE, Japan promotes the enhancement of medium- and long-term corporate value by improving corporate governance quality and capital cost awareness. These measures include improving dialogue with shareholders and appropriately using “explanations” to promote constructive dialogue, and both demonstrate the importance of improving capital market efficiency. The Corporate Value-up Program of South Korea aims to encourage listed companies to voluntarily disclose their corporate value-up programs, in order to enhance financial market evaluation and boost market confidence in combination with government tax incentives and the capital market support system.

Taiwan’s “Strengthening the Capital Market and Enhancing Market Value” plan aims to promote the development of new economy industries by enhancing corporate governance and market transparency, and strengthen communication with international investors to bring new momentum to the capital market. The promotion measures include incorporating the price to book ratio as a market making reward item, requiring listed companies to prepare sustainability reports, increasing the number of IPOs in new economy industries, and establishing an IR ESG engagement platform to demonstrate Taiwan’s emphasis on enhancing corporate value and market competitiveness.

However, the success of these measures still depends on the active participation of enterprises and the continuous promotion of stakeholders in the capital market as a whole. Only with the joint efforts of multiple parties, can the capital market achieve a long-term stable growth. If regulatory authorities in various countries can provide more attractive tax incentives, reward measures, or policy support, they may further strengthen the motivation for businesses to participate. In addition, as participants in the dialogue, institutional investors may gain practical experience in understanding how investors pay attention to and participate in the dialogue, and the disclosure content they expect companies to provide through interviews or seminars, in order to further strengthen investor relations. Exchanges may also promote companies to regularly update and disclose their corporate value enhancement plans to ensure information transparency and enhance investor confidence; they may also encourage enterprises to increase the scope and quality of English information disclosure to attract more foreign investors to participate.

In summary, Taiwan can learn from the promotion experience of Japan and South Korea, gradually plan to improve the quality of corporate governance and shareholder equity, encourage company management to fully consider the cost of capital and profitability, allocate resources reasonably to promote sustainable corporate growth, and establish a dedicated support system to assist enterprises in implementing value enhancement plans and providing necessary training and resources. These will help promote the sound development of the capital market, and enhance the long-term value and market competitiveness of enterprises.