The election of Moon Jae-in as the new president of South Korea is likely to improve corporate governance, along with Moon’s promise to reform chaebol, analysts at global investment banks said Wednesday.

Goldman Sachs economist Kwon Goo-hoon said he expected corporate government to improve, along with the National Assembly’s broad support for better governance as a sound business strategy.

“A more likely step toward better governance would be the adoption of the stewardship code by the National Pension Service, which may pave way for improved voting rights for shareholders, as suggested by Mr. Moon during the election campaign,” Kwon said in a report. The NPS is the nation’s largest institutional investor, holding stakes in many large-cap firms in Korea.

However, as all three progressive parties control only 56 percent of the 300 parliamentary seats and the conservative party showed a surprise advance in the election, changes in the Commercial Law will be limited to “areas with minimum differences in positions of major parties,” he said.

Mark Mobius, executive chairman at Templeton Emerging Markets Group, said Moon’s new government is expected to bring significant policy reversal in terms of chaebol compared to its predecessor.

“It was alleged chaebol were bribing (former President) Park’s associates, so it seems many South Koreans are hoping Moon can restore trust with what is expected to be a tough stance on the chaebols,” Mobius said in a report.

“Chaebol reform should result in better corporate governance and could lift the prices of many South Korean companies as the so-called ‘Korea discount’ narrows.”

Meanwhile, Steffen Dyck, senior credit officer at Moody‘s, said the new president is expected to pursue continuity in economic and fiscal policies.

However, Moon faces credit challenges in structural reforms in labor markets, public sector and social security, as well as corporate restructuring, chaebol reform and household debt, he noted.

“The probability of a military conflict with North Korea remains very low,” he said in a commentary.

By Kim Yoon-mi (yoonmi@heraldcorp.com)