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.

<p>One of the problems of corporate governance in Japanese companies is that of policy stock holding. This problem is a local issue unique to Japanese companies. For a long time, cross-shareholdings were regarded as a core issue in the corporate governance of Japanese companies, but in the last fiscal year, there seems to have been some movement. The amount of cross-shareholdings and changes from the previous year can be found in the text of the annual securities report (Yuho). Based on this disclosure information, I would like to examine the changes in policy stock holdings as of the end of July 2021 for the 1,729 companies in the Metrical Universe. The table below shows the top 30 companies with a net decrease in policy stock holdings compared to the previous year, indicating that many of them have slightly more policy stocks than total assets and lower ROA (actual).</p>

One of the problems of corporate governance in Japanese companies is that of policy stock holding. This problem is a local issue unique to Japanese companies. For a long time, cross-shareholdings were regarded as a core issue in the corporate governance of Japanese companies, but in the last fiscal year, there seems to have been some movement. The amount of cross-shareholdings and changes from the previous year can be found in the text of the annual securities report (Yuho). Based on this disclosure information, I would like to examine the changes in policy stock holdings as of the end of July 2021 for the 1,729 companies in the Metrical Universe. The table below shows the top 30 companies with a net decrease in policy stock holdings compared to the previous year, indicating that many of them have slightly more policy stocks than total assets and lower ROA (actual).

Japan's Governance: Change in Policy Shareholdings (July 2021)

Smartkarma Research Team, Smartkarma

Smartkarma Research

Smartkarma Research Team

Smartkarma

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<p>On our next Webinar, we welcome Insight Provider <a href="https://www.smartkarma.com/profiles/aki-matsumoto" target="_blank" data-smartkarma-citation="accounts:20673" rel="noopener">Aki Matsumoto</a> who will speak about the state of corporate governance in Japan. We will address whether corporate governance in the country is improving, and how it is linked to corporate profits and stock prices - something that not only investors, but also managers want to learn more about.</p><div><div><h3>The webinar will be hosted on Wednesday, 4 August 2021, 17:00 SGT/HKT.</h3></div></div><div><div><div class="content-highlight"><h2><a href="https://share.hsforms.com/1H9pFZOB-RF2J00kbvMmxcw2c5gj?zoom_webinar_id=83094407087" target="_blank" rel="noopener">Register for the Webinar here</a></h2></div></div></div><p>Aki Matsumoto is Executive Director and Co-Head of CG Research at Metrical Inc, an investment research and consulting firm focusing on corporate governance in Japan. He has been involved in investment management and the developing of financial products since 1984. His career started from Nikko Securities and he worked as an investment professional in Mizuho Securities and Sumitomo Mitsui Asset Management. Over the past six years, Metrical has analysed and rated the corporate governance criteria of 1,700 Japanese companies with a market capitalisation of JPY 10 billion or more.</p>

On our next Webinar, we welcome Insight Provider Aki Matsumoto who will speak about the state of corporate governance in Japan. We will address whether corporate governance in the country is improving, and how it is linked to corporate profits and stock prices - something that not only investors, but also managers want to learn more about.The webinar will be hosted on Wednesday, 4 August 2021, 17:00 SGT/HKT.Register for the Webinar hereAki Matsumoto is Executive Director and Co-Head of CG Research at Metrical Inc, an investment research and consulting firm focusing on corporate governance in Japan. He has been involved in investment management and the developing of financial products since 1984. His career started from Nikko Securities and he worked as an investment professional in Mizuho Securities and Sumitomo Mitsui Asset Management. Over the past six years, Metrical has analysed and rated the corporate governance criteria of 1,700 Japanese companies with a market capitalisation of JPY 10 billion or more.

Smartkarma Webinar | Corporate Governance and Value Creation in Japan

<p>As you know, the Boards of Directors of most listed companies in Japan are dominated by internal directors, and when the Corporate Governance Code was launched in 2015, it was expected to improve the governance of Japanese companies by appointing independent outside directors, which was extremely rare at the time. It was hoped that independent directors with diverse backgrounds from outside the company would bring a breath of fresh air to the board, which tended to prioritize the internal hierarchy, and that this would lead to more active and transparent discussions at board meetings. There are a number of issues related to independent outside directors, but this time I would like to consider the background of independent outside directors.</p>

As you know, the Boards of Directors of most listed companies in Japan are dominated by internal directors, and when the Corporate Governance Code was launched in 2015, it was expected to improve the governance of Japanese companies by appointing independent outside directors, which was extremely rare at the time. It was hoped that independent directors with diverse backgrounds from outside the company would bring a breath of fresh air to the board, which tended to prioritize the internal hierarchy, and that this would lead to more active and transparent discussions at board meetings. There are a number of issues related to independent outside directors, but this time I would like to consider the background of independent outside directors.

Japan's Governance: Background of Independent Outside Directors

<p style="text-align: left;">Metrical uses a variety of evaluation criteria to score the corporate governance of listed companies. One of the evaluation criteria is the disclosure factor regarding disclosure of information on annual shareholders meetings and investor relations. It is important to know whether a listed company is actively communicating information to its shareholders and investors, and whether its disclosure efforts are moving in the right direction. It makes a huge difference for shareholders and investors to make investment decisions if the company does not disclose information in a positive manner. This is because the disclosure of information that can be used to make decisions about the risk-return of a company's business and the location of its management risks can help reduce investment risks. It has also been confirmed that the AGM and IR disclosure scores (AGM/IR scores) are statistically correlated with ROA (actual performance) and Tobin's Q.</p>

Metrical uses a variety of evaluation criteria to score the corporate governance of listed companies. One of the evaluation criteria is the disclosure factor regarding disclosure of information on annual shareholders meetings and investor relations. It is important to know whether a listed company is actively communicating information to its shareholders and investors, and whether its disclosure efforts are moving in the right direction. It makes a huge difference for shareholders and investors to make investment decisions if the company does not disclose information in a positive manner. This is because the disclosure of information that can be used to make decisions about the risk-return of a company's business and the location of its management risks can help reduce investment risks. It has also been confirmed that the AGM and IR disclosure scores (AGM/IR scores) are statistically correlated with ROA (actual performance) and Tobin's Q.

Japan's Governance: Disclosure Factor for Annual General Shareholders Meeting and Investor Relations

<p>In recent years, more and more companies have begun to provide and disclose notices of general meetings of shareholders in English. In addition, an increasing number of companies are allowing electromagnetic voting, although this requires changes to the company's articles of incorporation. These are very good initiatives for shareholders and investors. On the other hand, the number of companies submitting their corporate governance reports to the Tokyo Stock Exchange in English is still limited. As of June 2021, only 306 of the 3,752 listed companies have submitted their corporate governance reports in English. The chart below shows the number of companies that have filed their corporate governance reports in English on a monthly basis since May 2018. You can see from the bar chart that the number has increased at a very moderate pace.</p>

In recent years, more and more companies have begun to provide and disclose notices of general meetings of shareholders in English. In addition, an increasing number of companies are allowing electromagnetic voting, although this requires changes to the company's articles of incorporation. These are very good initiatives for shareholders and investors. On the other hand, the number of companies submitting their corporate governance reports to the Tokyo Stock Exchange in English is still limited. As of June 2021, only 306 of the 3,752 listed companies have submitted their corporate governance reports in English. The chart below shows the number of companies that have filed their corporate governance reports in English on a monthly basis since May 2018. You can see from the bar chart that the number has increased at a very moderate pace.

Japan's Governance: Disclosure of Corporate Governance Report in English

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: Change in Policy Shareholdings (July 2021)

Companies with a net decrease in the amount of policy stocks holdings compared to the previous year have relatively higher policy stock holdings...

Metrical Inc

Smartkarma Webinar | Corporate Governance and Value Creation in Japan

On 4 August, 5pm SGT, join us for a presentation and discussion with Aki Matsumoto, who will speak about the state of corporate governance in Japan...

Smartkarma Research

Japan's Governance: Background of Independent Outside Directors

One of the reasons of the characteristic of having a large number of lawyers and accountants as independent directors in Japan would be related to...

Metrical Inc

Japan's Governance: Disclosure Factor for Annual General Shareholders Meeting and Investor Relations

It is important to know whether a listed company is actively communicating information to its shareholders and investors, and whether its...

Metrical Inc

Japan's Governance: Disclosure of Corporate Governance Report in English

Only 8% of companies disclose the corporate governance reports in English. Foreign investors, who trade more than 70% of TSE, can enhance...

Metrical Inc