Shareholder Returns: Why Does Nexon Earn in Korea and Distribute in Japan?

On August 14, Nexon stock on the Tokyo Stock Exchange soared by the daily limit of 20%. The reason was dividends. With a special dividend of 415 yen per share plus a regular dividend of 60 yen, this year’s total dividend reached 475 yen per share. Based on the stock price on the day of the announcement, the dividend yield hit 19%. There was almost no selling pressure, and trading volume dropped to a quarter of its usual level. It was a market with buyers but no sellers.

At the same time, the entity that actually earned this money was Nexon Korea, based in Gangnam, Seoul. It is a place where two IPs over 20 years old—MapleStory and Dungeon & Fighter—still account for nearly half of the company’s revenue. Yet, Nexon Games, the only company in the Nexon group listed on the Korean stock market, has never paid a dividend since its inception.

It is the same group, the same games, and money spent by the same users. But the moment that money crosses into Japan, it becomes “shareholder return,” and while it stays within the Korean listed company, it becomes “retained earnings.” It is not nationality that creates this difference.

One Company, Two Faces: How Nexon Korea’s Money Travels to Tokyo

Nexon Korea’s structure is simple. The Nexon headquarters listed in Tokyo holds 100% of Nexon Korea’s shares. The profits Nexon Korea earns in Korea are sent to Tokyo in the form of dividends. These dividends grew from 343.7 billion won in 2019 to 768 billion won in 2022, 953.6 billion won in 2024, and reached 1.8525 trillion won in 2025. It has increased more than fivefold in six years. This money becomes the source for Nexon headquarters’ shareholder returns in Tokyo and flows back up to the holding company, NXC. NXC is the largest shareholder with a 46% stake in Nexon, and the family of the late Chairman Kim Jung-ju holds a 72% stake in NXC.

Looking only at the path of the money, there is nothing strange. A subsidiary paying dividends to a parent company happens in every multinational corporation. The problem is that the same company shows two completely different faces. Nexon in Tokyo has an official policy to return at least 33% of its operating profit to shareholders, and in reality, it has kept to even more than that. The shareholder return ratio was 50% of operating profit in 2024 and 95% in 2025. Nexon Games in Seoul has no such policy. When asked about dividend plans, the company merely replies that it “will decide after securing investment resources and considering everything comprehensively.”

It is difficult to explain this asymmetry as a coincidence or lack of sincerity. This involves a much older question: Whose money is the profit earned by a company? And who holds the power to decide whether to distribute that money or hoard it?

Whose Money Is It? Fiduciary Duty as the Old Answer

Corporate law has an old answer to this question. In a corporation, management and the board of directors are trustees of shareholder capital. Just as a trustee in a trust must manage the trustor’s assets solely for the trustor’s benefit, management also has an obligation to manage the company’s profits for the benefit of the shareholders. This obligation is called fiduciary duty.

Looking through the lens of a trust, the difference in dividend payout ratio numbers is merely a result, not the cause. The real difference lies in who enforces this fiduciary duty and how strongly. In the U.S., the agents of this enforcement are multi-layered. Management performance compensation is largely linked to stock prices, activist funds demand dividends and share buybacks with board seats at stake, and Delaware courts actually hear and rule on lawsuits regarding breaches of fiduciary duty. Management that does not pay dividends and hoards cash faces the risk of being dismissed at the next shareholder meeting.

In Korea, this chain of enforcement is often broken in front of the controlling shareholder. The family of the largest shareholder effectively constitutes the board, and check-and-balance mechanisms like the separate election of audit committee members or the 3% restriction on voting rights for the largest shareholder were only introduced in 2020. The Stewardship Code was introduced in 2016, and in 2024, the Value-Up program led by the Korea Exchange began. While the system plays catch-up, the decision-making power over whether to share or hoard profits has long been tilted toward the controlling shareholder. What the Nexon case shows in the extreme is the fact that this decision-making power actually crosses borders. If the place where profit is earned and the place where the distribution of that profit is decided are different, the decision is always made in favor of the side holding the power.

Korea 29% vs. the US 100%: What the Payout Gap Really Says

Returning to the numbers, the gap is clear. According to data from Hana Securities, from 2012 to 2023, the average shareholder return ratio in Korea, including dividends and share buybacks, was 29%. During the same period, the U.S. was 100% and Europe was 88%. This is even lower than Japan (49%) and China (33%). This means that while some countries return the entirety of their earned profits to shareholders annually, Korean companies return only about one-third and hoard the rest within the company.

Two tools create this gap: dividends and share buybacks, which operate differently. Dividends are final the moment the cash leaves the account. They cannot be reversed. In contrast, a share buyback is only half a return in itself. While voting rights are suspended for repurchased shares, they are revived if sold to a third party. It must lead to retirement for the number of circulating shares to actually decrease and the per-share value to rise. U.S. companies make this retirement a practice. In 2025 alone, the scale of share buybacks by U.S. listed companies was $1 trillion, and dividend payments were $750 billion; most of the repurchased shares are retired. In Korea, on the other hand, it is not uncommon to keep shares after purchase without retiring them and then sell them to friendly stakes. This is the point where treasury shares turn from a tool for shareholder return into ammunition for defending management control. A commercial code amendment targeting this issue was proposed to the National Assembly in November 2025. If passed, retirement within one year of acquiring treasury shares will become mandatory.

The reason the U.S. is so focused on returns is not out of goodwill. The way companies raise funds in the New York stock market is through bonds and capital increases—ultimately, investor trust. A company that does not consistently distribute profits is unlikely to attract investors in the next capital increase. Dividends and share buybacks are signals that say, “We are still making money, and we will share it now as proof.” In 2025 alone, the scale of share buybacks by U.S. listed companies reached $1 trillion, and dividend payments were around $750 billion. Only companies that consistently send this signal can raise funds cheaply next time. Even the 1% excise tax on net share buybacks implemented in 2023 could not stop this flow. Howard Silverblatt of S&P Dow Jones Indices stated that the tax is still at a manageable level and has not affected overall share buybacks.

Two Years of Value-Up, and Why the Market Still Shrugs

However, following the logic of this trust game leads to the fact that the reaction of the Korean market is strange. Two years after the Korea Value-Up program began, 344 companies, or 42.5% of KOSPI-listed firms, have disclosed corporate value enhancement plans. A government-created Value-Up index has also been released. Yet, the practice of not retiring shares after buybacks by large-cap stocks, including Samsung Electronics, has not changed much, and the tendency for internal retention remains the same. The index has been re-evaluated, but the direction in which profits actually flow remains unchanged.

The tax structure on dividend income also contributes to this inertia. In Korea, if dividend income exceeds 20 million won per year, it is combined with other income for comprehensive taxation, and the tax rate can rise up to 45%. This is different from the U.S., where a relatively low tax rate is applied uniformly to dividend income. From the perspective of management, it is a more rational choice, at least in terms of tax calculation, to retain earnings within the company rather than increase dividends, and then respond with share buybacks when necessary. In a structure where the system penalizes dividends and ignores retention, it is not strange that management chooses retention.

Including the case of Japan makes this structure even clearer. Japan’s average shareholder return ratio (49%) is less than half of the U.S.’s, but it is certainly higher than Korea’s (29%). Japan was also once a country where internal retention and share buybacks for management defense were common practices. What broke this inertia was the corporate governance reform pushed by the Tokyo Stock Exchange after 2014—specifically, demands for an increased proportion of outside directors and a reduction in policy holdings (cross-shareholdings for management defense). As the system moved first, the practices of capital allocation followed. Nexon’s choice to list on the Tokyo Stock Exchange rather than Korea is closer to a decision to utilize the market trust where this reform has taken root. Under which market’s discipline one places the decision-making power has determined the dividend policy itself, regardless of nationality.

Here, the direction of the question changes. The diagnosis that the cause of the Korea Discount is a low dividend payout ratio is only half right. The payout ratio is a symptom. The real question is why the incentive for Korean corporate management to distribute profits is structurally weak. The answer has already been shown by Nexon. Only when decision-making power lies across the border in a market with strong checks does the money flow out quickly and fairly. When decision-making power remains domestically, in front of the controlling shareholder, even the same profit stops within the company’s walls.

Not a Question of Nationality, but of Control

On the day Nexon’s 3 trillion won special dividend was announced, a retail investor in Tokyo secured a 19% dividend yield in a single day. If you trace the source of that money, you find users sitting in front of game servers in Korea, the Korean developers who built those games, and the company those developers work for. For a domestic retail investor holding shares of that company, that money does not come to them, even within the same group.

This scene is uncomfortable not because of nationality. It is because the power to decide whether or not to share the money the company earned does not lie in the hands of the people who actually made that money. What Korea’s Value-Up needs to change is not just a single dividend payout ratio number, but the old arrangement of who holds this decision-making power. As long as that arrangement does not change, the index may rise again, but the direction in which profits flow will remain the same.

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