S.Korean listed companies' cancelled shares reach $8.6 bn over past 3 years

South Korea's listed companies have cancelled 11 trillion won ($8.6 billion) worth of shares over the past three years.

The Korea Exchange said on Sunday that from 2020 through last Friday, the value of cancelled shares by listed companies on the Kospi and Kosdaq markets reached 11 trillion won ($8.6 billion). The number of announcements of such cancellations doubled from 32 in 2021 to 64 last year while their value grew 23%, from 2.5 trillion won to 3.1 trillion won.

This year has seen 11 share cancellations worth a combined 1.2 trillion won. Listed companies known to have cancelled a large portion of their shares include Hyundai Motor Co. with 315.4 billion won, KB Financial Group with 300 billion won, Meritz Fire & Marine Insurance with 179.2 billion won, Shinhan Financial Group and Hana Financial Group with 150 billion won each, and KT Corp. with 100 billion won.

A company's cancellation of stocks is dubbed the "end game" of a shareholder-friendly policy, as the move raises return on equity through higher equity value for shareholders and reduction of capital stock. A simple stock buyback without cancellation has minimal impact on the growth of share prices over the long run.

"Share cancellation should lead to retirement to prevent controlling shareholders from misusing company shares, as well as improve governance structure," said Lee Sang-heon, an analyst at Hi Investment and Securities.

Write to Eui-Myung Park at uimyung@hankyung.com