[Editorial] Fair Value in Listed Company Mergers Risks Undermining Market Autonomy and Restructuring Flexibility

The ruling party and the government are pushing to amend the Capital Markets Act to mandate the use of a “fair value” reflecting assets and earnings, rather than the existing market price, in mergers of listed companies. On the surface, they claim to protect minority shareholders, but in reality, this is closer to a measure that will further rigidify corporate mergers and restructuring and place private-sector judgment under government control.

Prices are formed in the market; they are not calculated by a formula prescribed by law. Raising concerns about situations in which stock prices are undervalued may be valid, but trying to address this through a uniform obligation to calculate fair value carries a high risk of causing an even greater policy failure.

Fair value is, by its nature, a value concept into which the evaluator’s subjectivity inevitably enters, and the very expression of comprehensively reflecting assets, earnings, and future value is vague. The law cannot determine which variables should be reflected and with what weighting, and in the valuation process, companies will be exposed to greater costs, time burdens, and legal risks.

Moreover, in a situation where business judgment is already excessively regulated after the fact due to the introduction of directors’ duty of loyalty to shareholders, if the burden of proof regarding the calculation of merger value is strengthened as well, companies will be driven into an environment in which “they can carry out mergers, but in reality cannot.” This will inevitably lead to a contraction in M&A → delays in restructuring → weakening industrial competitiveness.

Recently, Korean companies have been actively pursuing strategic mergers to eliminate overlapping business lines, integrate affiliates, and reduce inefficiencies. However, if the calculation of fair value and the obligation to disclose external valuations and opinion letters are bound by law, even ordinary restructuring will inevitably be delayed by unnecessary reviews and procedures. When companies need to make swift decisions in response to market changes, they will be held back by the abstract standard of “appropriateness” defined by law.

Furthermore, the measure requiring new shares to be allotted to parent company shareholders when a subsidiary is listed after a spin-off is also excessive intervention. Allocating subscription ratios by law to a specific group of shareholders undermines the autonomy of capital raising and corporate strategy and significantly impairs the flexibility needed in the listing process.

In the end, this will confine corporate growth strategies within a standardized framework and, over the long term, risks entrenching the Korea discount rather than reducing it. Capital market institutions should focus on strengthening transparency so that market participants themselves can judge risks and rewards.

The short-sighted goal of shareholder protection is understandable, but the moment autonomous market judgment is restricted and prices are controlled, the damage will ultimately have no choice but to fall on investors. The most desirable merger value is not one determined by law, but one determined by investors and the market themselves.

2025. 12. 9.

Center for Free Enterprise (CFE)

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Original title: [논평] 상장사 합병 시 공정가액 적용, 시장의 자율성과 구조조정 유연성을 해칠 위험이 크다

Author: Center for Free Enterprise (CFE)

Date: 2025-12-09

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=comment&pn=1&idx=28325