Executive Director, Metrical Inc

Aki Matsumoto

Executive Director

Independent Leading Corporate Governance Research

Metrical Inc

METRICAL INC. is an independent leading Corporate Governance research firm in Japan where Corporate Governance is increasingly recognized as an important element on corporate management in these days. Thus, CG research and solutions would become an essential component of global capital markets and play important to contribute to transparency of the markets and maximize shareholders’ value in Japan. 

METRICAL INC. provides Corporate Governance research and analysis including rating services, and  also offers investment research and IR services with solutions and customized profound research on CG and IR issues.

<ul>
<li>The reason for slower reforming Growth Market seems to weigh on consideration for companies undergoing IPO review and coordination with stakeholders in IPO business. The investor's perspective is missing here.</li>
<li>Growth market listed companies that do not receive overseas investor engagement have more difficulty than prime market companies in raising their market capitalization to meet listing retention criteria.</li>
<li>Behind the failure to grow after IPOs are many managers who view IPO as place to cash in their equity rather than place to obtain the capital needed for growth.</li>
</ul>


The reason for slower reforming Growth Market seems to weigh on consideration for companies undergoing IPO review and coordination with stakeholders in IPO business. The investor's perspective is missing here.
Growth market listed companies that do not receive overseas investor engagement have more difficulty than prime market companies in raising their market capitalization to meet listing retention criteria.
Behind the failure to grow after IPOs are many managers who view IPO as place to cash in their equity rather than place to obtain the capital needed for growth.


Common Attitudes Toward IPOs Are Found in Parent-Subsidiary Listings

<ul>
<li>The dissolution of parent-subsidiary listing was achieved through the sale of a portion of the listed subsidiary's equity interest. The postponement of this issue is noted as an investment opportunity.</li>
<li>The status change of the listed subsidiary doesn't address concerns regarding the interests of the subsidiary's minority shareholders, nor does it implement restructuring of the parent company's entire business portfolio.</li>
<li>While investors are disappointed that the problem has been postponed, it also means that there are still many investment opportunities remaining, including for listed affiliates.</li>
</ul>


The dissolution of parent-subsidiary listing was achieved through the sale of a portion of the listed subsidiary's equity interest. The postponement of this issue is noted as an investment opportunity.
The status change of the listed subsidiary doesn't address concerns regarding the interests of the subsidiary's minority shareholders, nor does it implement restructuring of the parent company's entire business portfolio.
While investors are disappointed that the problem has been postponed, it also means that there are still many investment opportunities remaining, including for listed affiliates.


The Postponement of the Parent-Subsidiary Listing Issue Provides Further Investment Opportunities

<ul>
<li>Based on experience with "TSE's request,” it's impossible to request the same level of disclosure from every company. Companies that overseas investors can target should be requested to disclose proactively.</li>
<li>This “FSA's request” is expected to potentially cause companies to lose the effectiveness of the tactics they have used to control AGMs. Future steps are expected.</li>
<li>The slowdown in profit margin growth may also increase calls for improved corporate governance practices, with more companies reducing cross-shareholdings and launching stronger shareholder returns.</li>
</ul>


Based on experience with "TSE's request,” it's impossible to request the same level of disclosure from every company. Companies that overseas investors can target should be requested to disclose proactively.
This “FSA's request” is expected to potentially cause companies to lose the effectiveness of the tactics they have used to control AGMs. Future steps are expected.
The slowdown in profit margin growth may also increase calls for improved corporate governance practices, with more companies reducing cross-shareholdings and launching stronger shareholder returns.


Pre AGM Annual Securities Report Disclosure as a Clue to a True Dialogue with Investors

<ul>
<li>Even if annual securities reports are filed earlier, a few days before the AGM, there is not enough time for institutional investors to use them for proxy voting.</li>
<li>Many companies believe that they could control the AGM by two things: diversifying shareholder attention by holding the AGM on the same day and not providing sufficient information to shareholders.</li>
<li>In its next request, FSA plans to encourage companies to move AGM to later date by changing “record date.” However, it’ll take time to come to a compromise with companies.</li>
</ul>


Even if annual securities reports are filed earlier, a few days before the AGM, there is not enough time for institutional investors to use them for proxy voting.
Many companies believe that they could control the AGM by two things: diversifying shareholder attention by holding the AGM on the same day and not providing sufficient information to shareholders.
In its next request, FSA plans to encourage companies to move AGM to later date by changing “record date.” However, it’ll take time to come to a compromise with companies.


Substantial “pre AGM Filing of Annual Securities Reports” Will Be After 2027

<ul>
<li>It's progress that more companies are including ROE and ROIC as KPIs in mid-term management plans. On the other hand, it's true that many disclosures are misaligned with investors' perspectives.</li>
<li>As a result of not taking action on problem businesses, it’s often the case that deteriorating environment increases losses of the business, leading to revision of the “medium-term management plan.”</li>
<li>Investors are more likely to portray corporate value if a company provides measures for problem solving and growth, and reliable execution, rather than goals that are uncertain to be achieved.</li>
</ul>


It's progress that more companies are including ROE and ROIC as KPIs in mid-term management plans. On the other hand, it's true that many disclosures are misaligned with investors' perspectives.
As a result of not taking action on problem businesses, it’s often the case that deteriorating environment increases losses of the business, leading to revision of the “medium-term management plan.”
Investors are more likely to portray corporate value if a company provides measures for problem solving and growth, and reliable execution, rather than goals that are uncertain to be achieved.


A Guide May Be Offered to Disclose MTPs that Focus More on Strategy Rather than Matching Numbers

Japan

The TOPIX, also known as the Tokyo Stock Price Index, is a capitalization-weighted index of all companies listed on the First Section of the Tokyo Stock Exchange. The index is supplemented by the subindices of the 33 industry sectors. The index calculation excludes temporary issues and preferred stocks, and has a base value of 100 as of January 4, 1968.

TSE Tokyo Price Index TOPIX (TPX INDEX)

Common Attitudes Toward IPOs Are Found in Parent-Subsidiary Listings

I would like to discuss the issues in the April 3, the Nikkei article “70% of Companies Listed on TSE Growth Market Fail to Meet New Criteria. Low...

Metrical Inc

The Postponement of the Parent-Subsidiary Listing Issue Provides Further Investment Opportunities

I would like to discuss the issues on the Nikkei Shimbun article of March 31, “Parent-subsidiary dissolution trade has a way into play. TSE's...

Metrical Inc

Pre AGM Annual Securities Report Disclosure as a Clue to a True Dialogue with Investors

I would like to discuss the issues on the March 27 Nikkei article, “Disclosure of annual securities reports ‘possible a few days in advance.’...

Metrical Inc

Substantial “pre AGM Filing of Annual Securities Reports” Will Be After 2027

I would like to discuss the issues on the March 28 Nikkei article, “Annual securities report disclosure ‘at least before AGM requested in the name...

Metrical Inc

A Guide May Be Offered to Disclose MTPs that Focus More on Strategy Rather than Matching Numbers

I would like to discuss March 28 Nikkei article, “Medium-Term Management Plan Established, Record Number of Companies Abolish Them Due to Awareness...

Metrical Inc