Editorial: Curbing Dual Listings Abroad Must Not Kill the Ox to Straighten Its Horn

Going forward, dual listings of subsidiaries that infringe on the rights of ordinary shareholders of the parent company will be prohibited in principle. On Wednesday, the Financial Services Commission (FSC) and the Korea Exchange (KRX) announced detailed criteria to prohibit dual listings in principle while allowing exceptions, and decided to impose five obligations on parent company boards, including shareholder communication, preparing shareholder protection measures, and confirming shareholder consent. When listing a subsidiary spun off through a physical division, shareholder consent under a "3% rule" method, comparable to the appointment of audit committee members, was made mandatory, and the five obligations apply to listings on overseas exchanges.

Until now, dual listings by Korean companies have been carried out as a customary practice without particular regulation. However, so-called "split listings" have drawn criticism for causing subsidiary value to be double-counted, triggering sharp stock price declines, while decision-making centered on controlling shareholders has heightened uncertainty, contributing to the Korea discount. According to one statistic, Korea's dual listing ratio stood at 11.2% as of the end of 2025, significantly higher than the United States (0.05%), Japan (4.0%), China (2.4%), and Taiwan (2.7%). Accordingly, in March, President Lee Jae-myung ordered improvements to the system, saying, "I bought a solid stock, and one day I looked and the core had been scooped out, leaving only the shell."

The intent to protect ordinary shareholders by prohibiting indiscriminate dual listings is valid. However, it is questionable whether the detailed criteria announced by financial authorities on that day will be effective. To obtain shareholder consent for listing a subsidiary spun off through a physical division, a majority of participating shares and approval from at least one-quarter of total voting rights must be secured, and to meet the requirement of limiting the voting rights of the largest shareholder and specially related persons to 3%, passing the shareholders' meeting itself is difficult given the characteristics of the current corporate governance structure. In particular, fully applying the board's five obligations to restrict even overseas subsidiary listings risks becoming excessive regulation.

There is concern that prohibiting dual listings in principle, aimed at reducing the harm of the Korea discount, may cause an even greater national loss by blocking cutting-edge companies from expanding their global reach. The government must ensure that this measure does not become a misstep of killing the ox to straighten its horn, choking off corporate financing. Companies invest funds raised through subsidiary listings in new businesses or facilities and use them for mergers and acquisitions (M&A). But with the threshold for dual listings rising sharply, companies will now have no choice but to solve their investment financing through paid-in capital increases or corporate bond issuance. Financial authorities must operate the system carefully so that the funding channels for corporate investment in new businesses and growth are not blocked as well.