Study Suggests Stock Market Punishes 'Partying' Firms

A study shows that companies whose lavish entertainment expenses appear excessive compared with their business performance have not fared well on the stock market this year.

According to data released Friday by the Korea Stock Exchange, the average share price of the 20 listed companies that had the largest ratio of entertainment expenses to net profit in 2000 was up 9.8 percent this year through Wednesday; the Korea Composite Stock Price Index added 11.1 percent for the same period.

Textile and clothing shares have gained 11.9 percent on average this year. But the shares of Samyung Wool Textile Ind., whose entertainment expenses surpassed its net profit by 79 percent, declined 27.6 percent.

While the electrical and electronic equipment industry posted a 27.3 percent rise in share prices for the period, the share price of Korea Network Corp., whose entertainment expenses totaled 110 percent of its net profit, fell 6.6 percent.

Food and beverage stocks climbed 7.8 percent on average during the study's period.

But the stock of Crown Confectionery, whose entertainment expenses reached 90.5 percent of net profit, fell 10.7 percent.

According to the Korea Association of Listed Companies, the 485 companies, that settle accounts in December, recorded a total of 232.1 billion won ($178.5 million) for entertainment expenses last year, up 6.8 percent from 1999.

by Lee Hee-sung