Disclosure incentives, ESG visibility, and market valuation: Evidence from Korea’s Corporate Value-Up Program
This paper analyzes Korea's Corporate Value-Up Program to demonstrate that while policy incentives successfully broaden ESG disclosure participation, they dilute the market's positive reaction to the mere decision to disclose, shifting investor focus instead toward the credibility and specificity of commitments from firms with strong prior ESG reputations.
Original paper licensed under CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/). This is an AI-generated explanation of the paper below. It is not written or endorsed by the authors. For technical accuracy, refer to the original paper. Read full disclaimer
In the world of finance, there is a long-held belief that simply telling the truth is enough to make a company more valuable. The logic is straightforward: if a business opens its books and shares its plans, investors can see exactly what it is doing, trust it more, and be willing to pay a higher price for its stock. This idea has driven governments around the world to create rules that encourage companies to be transparent about their environmental impact, their treatment of workers, and how they are governed. The hope is that this flood of information will guide money toward better companies and force bad ones to improve. However, a critical question remains unanswered: does the act of sharing information always create value, or does it depend on who is listening and what exactly is being said? If everyone starts talking, does the conversation still matter?
Researchers in South Korea recently had a unique opportunity to test this question in the real world. They looked at a government program called the Corporate Value-Up Program, which asked listed companies to voluntarily share their plans for increasing shareholder value. For a while, only a small group of companies chose to participate. Then, in late 2025, the government changed the tax laws. Suddenly, companies that wanted to receive a specific tax break on their dividends were required to file these same plans. This change did not alter the rules for what the companies had to write; it only changed the number of companies that felt forced to write it. The number of participating firms jumped from 145 to 541 almost overnight. This shift allowed researchers to see what happens to the market's reaction when a voluntary signal becomes a universal requirement.
The study found that the market reacts very differently depending on whether the disclosure is a choice or a requirement. In the first phase, when companies chose to disclose their plans on their own, the stock prices of those companies went up significantly. On average, the value of these firms rose by about one percentage point over the three days following their announcement. This suggests that when a company voluntarily steps forward to share its strategy, investors see it as a positive sign of confidence. However, this reaction was not the same for everyone. Companies that were already well-known and closely watched by analysts and rating agencies saw much smaller price bumps. For these high-profile firms, the news of a disclosure was not new; investors already knew their strategies. The real value of the announcement came from the lesser-known companies, whose decision to speak up was a fresh signal to the market.
Once the tax incentive kicked in and participation became widespread, the story changed completely. In this second phase, the simple act of filing a plan no longer moved stock prices. The market did not reward the decision to disclose because, with nearly every eligible company filing, the act of filing stopped being a special signal. It became a routine administrative task. The researchers found that the average price change for these firms was effectively zero, indistinguishable from the changes seen in companies that did not file at all. The initial excitement of the voluntary period had vanished, replaced by a silence where the market no longer cared about the mere fact that a plan existed.
But the market did not stop paying attention entirely; it simply shifted its focus to the substance of the plans. In the second phase, investors began to look closely at the details of what the companies promised. They cared about whether the plans included specific, measurable goals, such as exact numbers for how much money would be returned to shareholders or a firm commitment to canceling shares that the company had bought back. However, this attention to detail was also conditional. The researchers discovered that investors only trusted and rewarded these specific commitments if they came from companies that were already under close scrutiny. When a highly visible, well-rated company made a concrete promise, its stock price reacted positively. When a lesser-known company made the exact same promise, the market ignored it. It seems that without a track record of being watched, a new promise is not enough to convince investors.
The study also highlighted a side effect of the rush to participate. Because the tax deadline coincided with the time of year when companies hold their annual meetings, a massive number of filings arrived on just a few days. Furthermore, to speed things up, the exchange allowed companies to use a simplified, abbreviated format for their reports. While these short reports still contained the core promises, they often skipped the background details and verification steps that help outsiders check if a promise is real. This shift meant that while more companies were talking, the quality of the information they provided had thinned out. The market's inability to distinguish between a genuine commitment and a hollow one in this new environment suggests that transparency alone is not a magic bullet.
Ultimately, the research shows that the value of corporate disclosure depends on two distinct things: the decision to speak and the credibility of what is said. When speaking is a rare choice, the decision itself is valuable. When speaking becomes a requirement, the decision loses its power, and the market only responds if the words are specific and come from a source it already trusts. The findings suggest that policies designed to force more companies to disclose information might succeed in getting more people to talk, but they may simultaneously weaken the signal that talking sends. For a disclosure system to remain useful, it cannot just rely on volume; it must ensure that the information provided is both new and believable to those who receive it.
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