Strengthened Audit Shocks Stock Market
March this year was a “cruel month” for listed companies. After reviewing corporate business reports for 2018, Korea Exchange (KRX) said it has found reasons for the possible delisting of 33 firms traded on the country's main KOSPI bourse and secondary KOSDAQ market. It made stocks of 69 firms administrative issues. Auditors' "qualified" opinions on audit reports of many companies sent shock waves through the stock market. In particular, KOSPI-listed companies and conglomerates were also included in the list, raising anxiety among investors.
This year, firms listed on the KOSPI market were also not free from the audit issue. Five of the companies listed on the KOSPI whose fiscal year ended December 31, 2018, are in the process of being delisted and three firms were newly designated as administrative issues, according to KRX on April 2. Five out of six companies on the existing administrative issue list were lifted from the list.
The number of companies that face the prospect of being delisted from the KOSDAQ market surged. It fell short of earlier market estimates of 40 to 50 but still had a high growth rate. The number of KOSDAQ-listed companies which hadreasons for the possible delisting reached 28, up more than 50 percent from 18 last year.
These companies can appeal the case within seven days of notification and the KRX which receives an objection must decide on whether to delist the companies or give a grace period of improvement within 15 days after deliberation of the Corporate Evaluation Committee.
The number of issuesforadministration also increased. Thirty four companies were newly designated as administrative issues, up 9 from 25 a year ago.
However, the number of companies lifted from the administrative issue list stood at 11, down 1 from 12 in 2018. The number of listed companies which were designated as administrative issues totaled 66 as of April 2.
In addition, the number of investment alert issues grew. Thirty firms were newly designated as investment alert issues, up over 40 percent from 21 last year. The total number of investment alert issues came to 52 as of April 2, while seven firms were lifted from the list.