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Korean J Financ Stud > Volume 47(2); 2018 > Article
Korean Journal of Financial Studies 2018;47(2):199-233.
DOI: https://doi.org/10.26845/KJFS.2018.04.47.2.199    Published online April 30, 2018.
Anticipated Financial Effects and Promotion of No-Par Share System in Korea
Bong-Chan Kho, Myung-Jig Kim, Jin-Woo Kim
국내 무액면주식제도의 재무적 기대효과와 활성화 방안
고봉찬, 김명직, 김진우
1서울대학교
2한양대학교
3부산대학교
Abstract
No-par share system in Korea was first suggested by a 2006-revision draft of Company Law, and came into effect from 2012 after the 2011 amendment in Commercial Law. Since then, Korean firms can freely choose to issue one type of shares, either par value shares or no-par shares. Nonetheless, no Korean firm has yet issued no-par shares, which is largely because the same regulation applies to the no-par shares that stock splits must be approved by a special resolution at a shareholder meeting. In this regard, we summarize the current status and problems of the no-par share system, analyze the reasons why Korean firms are reluctant to issue no-par shares, and draw policy implications from foreign experiences to vitalize the no-par share system in Korea.
A close examination of foreign experiences suggests that stock splits became more active after the adoption of no-par system, which in turn affects both stock prices and liquidity positively. The same positive effects on both stock prices and liquidity are observed for stock splits announced by Korean firms listed in Korea Exchange over the period from 2000 to 2015. The empirical results, for instance, show very significant cumulative abnormal returns (CARs) of 7.2% from 10-days prior to the announcement to the announcement date. In particular, the CARs of dividend-increasing firms are significantly higher than those of dividend-decreasing firms, which supports the hypothesis that stock splits convery information on future dividend-paying ability of a firm. Cross-sectional regressions of the CARs show that the CARs are higher for firms with higher stock price, larger cash flows and higher stake of major shareholders. We also find significant improvements in liquidity and turnover ratios after the stock split events.
Given these positive benefits of no-par share system, we propose and compare three plans for revising the current optional no-par share system: ① Mandatory no-par share system, ② Dual system allowing both par and no-par share systems, ③ Dual system, but actively promoting no-par share system. In sum, there are real benefits for firms to choose and design their share capital structure by either stock splits or reverse stock splits in a timely fashion via no-par share system, and thus, this is the right time to give serious thoughts on shifting our focus from an optional no-par system to more mandatory no-par share system.
Key Words: 무액면주식제도,주식분할,사건연구,유동성 증대효과,배당여력 정보효과,No-Par Share System,Stock Split,Event Study,Liquidity Enhancement Hypothesis,Information Signaling Hypothesis
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