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>This article analyzes how changes in market capitalization correlate with changes in performance and corporate governance ratings.</li>
<li>Note that the % change in market cap as of December 2020 and December 2021 for 1,704 companies confirms a positive correlation that is more significant with ROA than ROE.</li>
<li>Companies that improved their Metrical score by 10 ppt or more increased their market capitalization the most, followed by companies that improved Metrical score by 5 ppt to 10 ppt.</li>
</ul>


This article analyzes how changes in market capitalization correlate with changes in performance and corporate governance ratings.
Note that the % change in market cap as of December 2020 and December 2021 for 1,704 companies confirms a positive correlation that is more significant with ROA than ROE.
Companies that improved their Metrical score by 10 ppt or more increased their market capitalization the most, followed by companies that improved Metrical score by 5 ppt to 10 ppt.


Japan's Governance: How Far Has Corporate Governance Progressed in 2021(3)

<ul>
<li>The Nikkei newspaper reported that "Equity financing in 2021 is expected to triple from the previous year to 3.7 trillion yen, the highest level in 11 years since the GFC.</li>
<li>The increase in the number of public offerings by Japanese companies to foreign investors could be a reflection of the declining demand from Japanese investors to invest in Japanese companies.</li>
<li>The inability to find investment opportunities is the essence of the problem for Japanese companies. More importantly, they need to find and invest in investment opportunities for sustainable growth.</li>
</ul>


The Nikkei newspaper reported that "Equity financing in 2021 is expected to triple from the previous year to 3.7 trillion yen, the highest level in 11 years since the GFC.
The increase in the number of public offerings by Japanese companies to foreign investors could be a reflection of the declining demand from Japanese investors to invest in Japanese companies.
The inability to find investment opportunities is the essence of the problem for Japanese companies. More importantly, they need to find and invest in investment opportunities for sustainable growth.


Japan's Governance: About the Article on Capital Increase in 2021

<ul>
<li>With regard to the key actions actually taken by listed companies, this article will take a look at how much the efforts of companies have improved over the past year.</li>
<li>We have reviewed the effective use of cash and assets, but we have not been able to confirm any clear use that would lead us to expect growth. </li>
<li>While stock prices and valuations are rising, the slight decline in the ratio of foreign shareholders may have something to do with the sluggish growth in ROE and ROA.</li>
</ul>


With regard to the key actions actually taken by listed companies, this article will take a look at how much the efforts of companies have improved over the past year.
We have reviewed the effective use of cash and assets, but we have not been able to confirm any clear use that would lead us to expect growth. 
While stock prices and valuations are rising, the slight decline in the ratio of foreign shareholders may have something to do with the sluggish growth in ROE and ROA.


Japan's Governance: How Far Has Corporate Governance Progressed in 2021 (2)

<ul>
<li>I would like to have figures to see how far the corporate governance has been enhanced as a result of the efforts of companies for 2021.</li>
<li>The ratio of independent directors and Nomination and Compensation Committees, which were specifically mentioned in the revised Corporate Governance Code as areas for improvement, have been improved.</li>
<li>Items that weren't specifically mentioned in the revised Corporate Governance Code as requiring improvement, such as chair of board, female directors, and anti-takeover measures, were evaluated with only limited improvement.</li>
</ul>


I would like to have figures to see how far the corporate governance has been enhanced as a result of the efforts of companies for 2021.
The ratio of independent directors and Nomination and Compensation Committees, which were specifically mentioned in the revised Corporate Governance Code as areas for improvement, have been improved.
Items that weren't specifically mentioned in the revised Corporate Governance Code as requiring improvement, such as chair of board, female directors, and anti-takeover measures, were evaluated with only limited improvement.


Japan's Governance: How Far Has Corporate Governance Progressed in 2021? (1)

<ul>
<li>It would be reasonable to hypothesize that companies with takeover defense measures generally lack a clear growth policy and fail to communicate such a growth policy to investors.</li>
<li>With regard to Growth Policy and Capital Allocation Policy and Disclosures, the analysis of companies with and without anti-takeover measures revealed a clear difference.</li>
<li>Companies with anti-takeover lack robust growth policy and capital allocation to increase corporate value and fail to communicate the policy to investors, resulting in lower foreign shareholders, low market cap.</li>
</ul>


It would be reasonable to hypothesize that companies with takeover defense measures generally lack a clear growth policy and fail to communicate such a growth policy to investors.
With regard to Growth Policy and Capital Allocation Policy and Disclosures, the analysis of companies with and without anti-takeover measures revealed a clear difference.
Companies with anti-takeover lack robust growth policy and capital allocation to increase corporate value and fail to communicate the policy to investors, resulting in lower foreign shareholders, low market cap.


Japan's Governance: What's Behind the Underperformance of Companies with Takeover Defenses?

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)

Japan's Governance: How Far Has Corporate Governance Progressed in 2021(3)

Companies that improved corporate governance practices in Metrical score by 10 ppt or more increased their market cap the most, followed by...

Metrical Inc

Japan's Governance: About the Article on Capital Increase in 2021

The increase in the number of public offerings by Japanese companies to foreign investors could be seen as a reflection of the declining demand...

Metrical Inc

Japan's Governance: How Far Has Corporate Governance Progressed in 2021 (2)

Focusing on the allocation of cash and the utilization of assets, which influence the growth of corporate value, this article will see how far the...

Metrical Inc

Japan's Governance: How Far Has Corporate Governance Progressed in 2021? (1)

The Corporate Governance Code has been revised for 2021. This article will review how far listed companies have progressed in their efforts to...

Metrical Inc

Japan's Governance: What's Behind the Underperformance of Companies with Takeover Defenses?

From this analysis, the growth policy of companies with anti-takeover provisions is not clear, and there is problem with effective use of these...

Metrical Inc