Korean firms lack ability to mobilize cash: report

[THE INVESTOR] The retained earnings of Korea’s top 500 companies fall far behind that of top 25 U.S.-based companies, a new report showed on June 16.

Retained earnings refer to assets after dividends are paid out. The funds and other assets included in retained earnings are then used for investment, debt repayment and other management activities. 

The report compiled by the Korea Economic Research Institute showed that Korea’s top 500 companies by market capitalization had combined retained earnings of $671.1 billion. The figure excludes financial companies.

In comparison, the figure of top 25 nonfinancial firms based in the U.S. came in at over $2 trillion. Of these, ExxonMobil came on top with $412.4 billion in retained earnings.

Along with U.S. companies, Japan’s top 25 nonfinancial companies were also shown to have larger retained earnings with the figure coming in at about $671.1 billion.

The report is in contrast to recent criticism that local companies were withholding dividends and slow in making investments.

The KERI said that Korean firms’ retained earnings are growing at a slower pace than that of comparable foreign entities, and that such a development indicates worsening profitability.

By Choi He-suk (cheesuk@heraldcorp.com)