Retail investors prefer US stocks for corporate innovation, profitability

Regulations on corporate governance not a significant factor in investment decision: KCCI

By Jun Ji-hye

Nearly 55 percent of Koreans prefer the U.S. stock market over the domestic one, with corporate innovation cited as the primary reason for their preference, according to a survey by the Korea Chamber of Commerce and Industry (KCCI), Sunday.

The business lobby conducted the survey on public perception of Korean and U.S. capital markets through its online platform, gathering responses from 1,505 participants.

The results showed that 54.5 percent of Koreans preferred the U.S. capital market, while only 23.1 percent favored the domestic market. The response indicating a similar preference for both markets was 22.4 percent.

The most cited reason for investing in the United States was corporate innovation and profitability, which accounted for 27.2 percent. This was followed by active shareholder returns at 21.3 percent, the stagnation of the domestic stock market at 17.5 percent, the U.S. economic boom at 15.4 percent, transparent corporate governance at 14.8 percent and investor-friendly tax and policy support at 3.8 percent.

As public interest in investing in the U.S. capital market has grown here, the value of U.S. stocks held by domestic investors through the Korea Securities Depository surpassed $100 billion for the first time last November.

This trend has fueled calls to revitalize the Korean stock market by enhancing corporate value through measures such as amendments to the Commercial Act. The proposed amendment, advocated by opposition parties, would expand corporate directors’ fiduciary duties to include greater responsibility toward shareholders.

However, a KCCI official emphasized that corporate governance regulations were not a significant factor in investment decisions.

“Recently, corporate governance regulations have been regarded as the key solution for enhancing corporate value in Korea,” the official said. “However, the survey results show that the public primarily invests in U.S. companies for their innovation and profitability, while relatively fewer respondents cited corporate governance as a reason for their investment.”

In the survey, 34.6 percent of respondents cited the stagnation of innovation in Korean companies as the primary factor regarding the reasons for the lack of vibrancy in the domestic stock market.

Other reasons mentioned included regulation-centered corporate and financial policies, which accounted for 23.6 percent, a short-term investment culture at 17.5 percent, weak corporate governance and insufficient shareholder returns at 15.4 percent, and a lack of tax and policy support for financial investment at 6.8 percent.

As for the top priorities to enhance the value of the domestic capital market, respondents placed significant importance on expanding tax incentives for financial investors.

Specifically, 26 percent stressed the need to introduce tax benefits for long-term stock holdings, while 21.8 percent highlighted the importance of reducing dividend income tax.

The survey also indicated that the preference of Korean investors for the U.S. stock market is expected to grow.

When asked about their future investment plans, 79 percent expressed their intention to increase investments in the U.S. capital market. For the domestic stock market, 54.3 percent expressed their intention to increase investments.

“Based on the survey results, strengthening the capital market’s value should focus on fostering corporate innovation and expanding incentives for investors backing innovative companies, rather than implementing new regulations,” KCCI Research Division Executive Director Kang Seog-gu said.

“Rather than amending the Commercial Act to enforce corporate governance regulations, the National Assembly should prioritize targeted revisions to the Capital Markets Act to address specific concerns.”