A total of 22 Chinese companies were allowed to trade their shares on the Korean stock market since 2007, but seven Chinese firms have been delisted so far.

Investor confidence toward locally listed Chinese shares plunged after China Gaoxian Fibre Fabric Holdings Ltd, a Chinese textile company, was expelled in 2011 just months after listing on KOSDAQ over dubious accounting practices.

Following the fiasco that led to a spate of lawsuits by angry Korean investors, several Chinese firms listed on the Seoul bourse were hit hard.

China's United Technology Holdings was ousted from the local bourse in 2012 after failing to comply with regulatory conditions.

Two Chinese firms -- 3Nod Digital and China Food Packaging -- voluntarily dropped the listing of their shares in 2013.

The negative sentiment, coupled with tighter reviews by the Korea Exchange, dried up initial public offerings by foreign companies in the past years. 

Foreign firms listed on the local bourse have some legal blind spots because they don't need to abide by Korean regulations on external audits.

So, some analysts said an arranger of an initial public offering by a foreign company should strengthen its screening process of the company's financial status.

Hwang Se-woon, a senior researcher at the Korea Capital Market Institute, said foreign companies can't be reprimanded by Korean laws.

Poorly performing foreign firms must be screened during the process of listing, but such efforts are still "insufficient," Hwang said. (Yonhap)