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.

The Tokyo Stock Exchange announced on April 30 that it will reform TOPIX in conjunction with the TSE's market reorganization. As I have mentioned several times in previous articles, TOPIX will be reformed to exclude stocks that do not meet the market capitalization criteria after October 2022, and to "select" stocks based on certain criteria, rather than including all stocks listed on the market as the current index does, in order to improve the quality of the index. One source says that the S&amp;P 500 will be included. According to one view, the new TOPIX will be modeled after the S&amp;P 500. It is more important to pay attention to this method of "selection" based on certain criteria.

The Tokyo Stock Exchange announced on April 30 that it will reform TOPIX in conjunction with the TSE's market reorganization. As I have mentioned several times in previous articles, TOPIX will be reformed to exclude stocks that do not meet the market capitalization criteria after October 2022, and to "select" stocks based on certain criteria, rather than including all stocks listed on the market as the current index does, in order to improve the quality of the index. One source says that the S&amp;P 500 will be included. According to one view, the new TOPIX will be modeled after the S&amp;P 500. It is more important to pay attention to this method of "selection" based on certain criteria.

As you may have heard, on July 9, 2021, Tokyo Stock Exchange, Inc. released the results of its primary assessment of compliance with the listing maintenance criteria for the new market category. Upon receipt of the results, a number of companies announced that they have confirmed that they are in compliance with the listing maintenance criteria for the Prime Market. It is reported that 664 companies, or about 30% of the 1,527 companies listed on the first section of the Tokyo Stock Exchange, failed to meet the newly established criteria of "market capitalization considering the floating stocks. These listed companies will be able to list on the prime market for the time being if they disclose a report that shows how they can improve their market capitalization, such as by increasing the market capitalization calculated by shares traded on the market. On the other hand, as I mentioned in my previous article, "TSE Reorganization and the Future of Corporate Governance," the TSE is aiming to revise its corporate governance code by December and has indicated that it will impose new governance guidelines on companies listed on the prime market.

As you may have heard, on July 9, 2021, Tokyo Stock Exchange, Inc. released the results of its primary assessment of compliance with the listing maintenance criteria for the new market category. Upon receipt of the results, a number of companies announced that they have confirmed that they are in compliance with the listing maintenance criteria for the Prime Market. It is reported that 664 companies, or about 30% of the 1,527 companies listed on the first section of the Tokyo Stock Exchange, failed to meet the newly established criteria of "market capitalization considering the floating stocks. These listed companies will be able to list on the prime market for the time being if they disclose a report that shows how they can improve their market capitalization, such as by increasing the market capitalization calculated by shares traded on the market. On the other hand, as I mentioned in my previous article, "TSE Reorganization and the Future of Corporate Governance," the TSE is aiming to revise its corporate governance code by December and has indicated that it will impose new governance guidelines on companies listed on the prime market.

Japan's Governance: TSE Prime Market Listing Requirements and Revised Corporate Governance Code

It has been said for a long time that foreign investors account for more than 70% of Tokyo Stock Exchange stock trading volume. Let's take a look at what kind of stocks foreign investors own from the aspect of corporate governance. By conducting a multiple regression analysis using the foreign shareholder's ownership ratio and governance factors, we can see what factors foreign investors are investing in companies as a result.

It has been said for a long time that foreign investors account for more than 70% of Tokyo Stock Exchange stock trading volume. Let's take a look at what kind of stocks foreign investors own from the aspect of corporate governance. By conducting a multiple regression analysis using the foreign shareholder's ownership ratio and governance factors, we can see what factors foreign investors are investing in companies as a result.

Japan's Governance: Foreign Shareholder Ownership and Governance Factors

METRICAL has been collaborating with BDTI on a study of the relationship between corporate governance practices and value creation. We have analyzed the corporate governance practices and value-creating performance of approximately 1,800 listed companies with a market capitalization of more than approximately JPY10 billion from a variety of perspectives. By examining board practices (the corporate governance guidelines, practices, and structure of the board of directors) and specific actions (the actual actions of the company) separately, this analysis has identified 3 financial performance indicators (ROE, ROA, and Tobin's Q) for each of the board practices and actions. This is because, since the introduction of the Corporate Governance Code, there has been some improvement in the activities of the Board of Directors. However, assuming that one of the key goals of a company is value creation, it is very important to regularly analyze whether such improvements (specifically, which improvements) lead to value creation in order to improve the effectiveness of engagement and stewardship. After the season of AGM, I would like to update you on how independent outside directors have changed.

METRICAL has been collaborating with BDTI on a study of the relationship between corporate governance practices and value creation. We have analyzed the corporate governance practices and value-creating performance of approximately 1,800 listed companies with a market capitalization of more than approximately JPY10 billion from a variety of perspectives. By examining board practices (the corporate governance guidelines, practices, and structure of the board of directors) and specific actions (the actual actions of the company) separately, this analysis has identified 3 financial performance indicators (ROE, ROA, and Tobin's Q) for each of the board practices and actions. This is because, since the introduction of the Corporate Governance Code, there has been some improvement in the activities of the Board of Directors. However, assuming that one of the key goals of a company is value creation, it is very important to regularly analyze whether such improvements (specifically, which improvements) lead to value creation in order to improve the effectiveness of engagement and stewardship. After the season of AGM, I would like to update you on how independent outside directors have changed.

Japan's Governance: Update on the ％ of Independent Outside Directors

Metrical scores and evaluates the corporate governance practices of approximately 1,700 companies listed on the Tokyo Stock Exchange. The scores (ratings) are based on more than 20 criteria. The 20 companies with the highest scores are indexed as CG Top 20 Stocks, for comparing to TOPIX and JPX400. The performance of CG Top 20 Stocks to that of TOPIX and JPX400, shows the outperformance of the Top 20 Stocks.

Metrical scores and evaluates the corporate governance practices of approximately 1,700 companies listed on the Tokyo Stock Exchange. The scores (ratings) are based on more than 20 criteria. The 20 companies with the highest scores are indexed as CG Top 20 Stocks, for comparing to TOPIX and JPX400. The performance of CG Top 20 Stocks to that of TOPIX and JPX400, shows the outperformance of the Top 20 Stocks.

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: TOPIX Reform

New TOPIX will result in some companies failing to remain in TOPIX even if they can maintain listing on prime market. They will cut cross...

Metrical Inc

Japan's Governance: TSE Prime Market Listing Requirements and Revised Corporate Governance Code

While increasing the # of independent directors is a huge challenge in Japanese, there are still companies with such high % of independent...

Metrical Inc

Japan's Governance: Foreign Shareholder Ownership and Governance Factors

By conducting a multiple regression analysis using the foreign shareholder's ownership ratio and governance factors, we can see what factors...

Metrical Inc

Japan's Governance: Update on the ％ of Independent Outside Directors

As of June, the number of companies with a majority of independent directors increased 41 to 136 from a year ago out of 1,773 companies in Metrical...

Metrical Inc

Japan's Governance: Stock Performance

Metrical scores the corporate governance practices of approximately 1,700 companies listed on the TSE. The 20 companies with the highest scores...

Metrical Inc