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 efforts of SMEs aren't initiatives for disclosure by listed companies, but measures born out of situations that compelled them to promote diversity as integral part of their business operations.</li>
<li>Not only SMEs, but also listed companies with management keenly aware of business risks could promote diversity initiatives that are rooted in their business without taking time to make decisions.</li>
<li>The goal should be to make human capital and diversity a core competence rooted in the business, not a passive initiative such as doing it for disclosure.</li>
</ul>


The efforts of SMEs aren't initiatives for disclosure by listed companies, but measures born out of situations that compelled them to promote diversity as integral part of their business operations.
Not only SMEs, but also listed companies with management keenly aware of business risks could promote diversity initiatives that are rooted in their business without taking time to make decisions.
The goal should be to make human capital and diversity a core competence rooted in the business, not a passive initiative such as doing it for disclosure.


Key to Promote Diversity Isn't Company's Size but Rather Manager's Judgment and Ability to Execute

<ul>
<li>Not much progress has been made in the early disclosure of convocation notices. The key to even earlier disclosure of convocation notices is the moving up of earnings announcement dates.</li>
<li>Overseas investors require that all materials in the notice of convocation be provided translated in English, and only 27.3% of prime market listed companies have responded.</li>
<li>Few companies file their annual securities reports prior to AGMs. This can be taken as companies' intention to provide as little detailed information as possible to shareholders prior to AGMs.</li>
</ul>


Not much progress has been made in the early disclosure of convocation notices. The key to even earlier disclosure of convocation notices is the moving up of earnings announcement dates.
Overseas investors require that all materials in the notice of convocation be provided translated in English, and only 27.3% of prime market listed companies have responded.
Few companies file their annual securities reports prior to AGMs. This can be taken as companies' intention to provide as little detailed information as possible to shareholders prior to AGMs.


Companies Keen to Reduce Administrative Costs, but Reluctant to Provide Convenience to Shareholders

<ul>
<li>60% companies have established policies to promote human capital. Companies will be asked whether their goals are reasonable and whether their actual measures and progress toward those goals are sufficient.</li>
<li>Since many companies have set a target of 14-15% for % female managerial positions around 2025, it makes us worry whether they can really achieve 30% target in 2030.</li>
<li>Few companies have disclosed specific impact estimates under certain conditions. It’s expected that some proactive companies will push others to do the same regarding "Scope 3" in the future.</li>
</ul>


60% companies have established policies to promote human capital. Companies will be asked whether their goals are reasonable and whether their actual measures and progress toward those goals are sufficient.
Since many companies have set a target of 14-15% for % female managerial positions around 2025, it makes us worry whether they can really achieve 30% target in 2030.
Few companies have disclosed specific impact estimates under certain conditions. It’s expected that some proactive companies will push others to do the same regarding "Scope 3" in the future.


Demand for Disclosure to Answer the Goal of Promoting Sustainability to Increase Corporate Value

<ul>
<li>Many companies had the goal of IPOs as a means to save taxes rather than growth, but it's good to seriously consider go private for the sake of their shareholders.</li>
<li>This is due to companies' awareness of listing costs, such as demands from overseas investors for improved governance and requests from TSE for "management with awareness of the stock price.”</li>
<li>Another issue that needs to be examined is the loss of growth and profitability for companies that are delisted and then relisted.</li>
</ul>


Many companies had the goal of IPOs as a means to save taxes rather than growth, but it's good to seriously consider go private for the sake of their shareholders.
This is due to companies' awareness of listing costs, such as demands from overseas investors for improved governance and requests from TSE for "management with awareness of the stock price.”
Another issue that needs to be examined is the loss of growth and profitability for companies that are delisted and then relisted.


Maybe Management Is Finally Becoming Aware of the Cost of Listing

<ul>
<li>Since the ROE has been hovering around the 9% ceiling, the challenge is that few companies could present future outlook convincing enough to raise expectations of sustainable ROE growth.</li>
<li>Since stable BPS has higher correlation with TOPIX than EPS, investors trust a company that accumulates cash flow in shareholders' equity to sustainably increase profits than to temporarily increase profits.</li>
<li>Since it’s been confirmed that Tobin's Q of companies with more cash on hand is higher, the stock valuations of companies with higher cash flow margins tend to be higher.</li>
</ul>


Since the ROE has been hovering around the 9% ceiling, the challenge is that few companies could present future outlook convincing enough to raise expectations of sustainable ROE growth.
Since stable BPS has higher correlation with TOPIX than EPS, investors trust a company that accumulates cash flow in shareholders' equity to sustainably increase profits than to temporarily increase profits.
Since it’s been confirmed that Tobin's Q of companies with more cash on hand is higher, the stock valuations of companies with higher cash flow margins tend to be higher.


A Market with a Low Average ROE Favors Valuations for Companies with More Reliable Cash Flow

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)

Key to Promote Diversity Isn't Company's Size but Rather Manager's Judgment and Ability to Execute

I would like to discuss the issues on the November 27 Nikkei article, "Diversity Wave in Small and Medium Enterprises: Male Maternity Leave and...

Metrical Inc

Companies Keen to Reduce Administrative Costs, but Reluctant to Provide Convenience to Shareholders

I would like to discuss TSE's disclosure, "Status of the June 2023 General Meetings and Future Trends Regarding the Environmental Improvements...

Metrical Inc

Demand for Disclosure to Answer the Goal of Promoting Sustainability to Increase Corporate Value

I would like to discuss the issues on the Nikkei article of November 21, "Nikkei Survey Finds 60% of Japanese Firms Place More Emphasis on Human...

Metrical Inc

Maybe Management Is Finally Becoming Aware of the Cost of Listing

I would like to discuss the issues on the November 23, 2023 Nikkei article, "Going Private Requires Discipline and Strategy."

Metrical Inc

A Market with a Low Average ROE Favors Valuations for Companies with More Reliable Cash Flow

I would like to discuss the issues on the November 19 Nikkei article, "Japanese Stocks' 2024 Issue is 'Multiples': Insights from a P/B below 1x."

Metrical Inc