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>Tobin's Q is not high for companies whose policy holdings are low relative to their net assets or total assets. When discussing policy shareholdings, deemed shareholdings should be included.</li>
<li>Companies with a low ratio of total policy holdings plus deemed holdings to total assets have notably higher ROE, ROA, and Tobin's Q. Vice versa.</li>
<li>These companies generate returns exceeding their cost of capital and are managed with asset and capital efficiency in mind, which shows in their approach to policy shareholdings as governance practices.</li>
</ul>


Tobin's Q is not high for companies whose policy holdings are low relative to their net assets or total assets. When discussing policy shareholdings, deemed shareholdings should be included.
Companies with a low ratio of total policy holdings plus deemed holdings to total assets have notably higher ROE, ROA, and Tobin's Q. Vice versa.
These companies generate returns exceeding their cost of capital and are managed with asset and capital efficiency in mind, which shows in their approach to policy shareholdings as governance practices.


Why Should Policy Shares Be Viewed as Including Deemed Shares Held?

<ul>
<li>30% female board member set by TSE isn't surprising, as it's level within reach, but the fact that TSE set explicit target that companies can't excuses is a first step.</li>
<li>To ensure that a female board member isn't isolated from other board members, multiple female board members should be elected. In this sense, 30% female board members goal makes sense.</li>
<li>In fact, the most interesting question is how many more companies will approach 50% after achieving a 30% of female board members.</li>
</ul>


30% female board member set by TSE isn't surprising, as it's level within reach, but the fact that TSE set explicit target that companies can't excuses is a first step.
To ensure that a female board member isn't isolated from other board members, multiple female board members should be elected. In this sense, 30% female board members goal makes sense.
In fact, the most interesting question is how many more companies will approach 50% after achieving a 30% of female board members.


The ％ of Female Board Members Exceeding 30% Shows Whether the Company Is Truly Pursuing Diversity

<ul>
<li>TSE plans to publish a list of companies that disclosed and those that are "under consideration" for disclosure in "Management Conscious of Cost of Capital and Stock Price." </li>
<li>TSE's plan to introduce actual investor feedback on how investors view dialogue and engagement and what kind of information disclosure and IR they expect from companies is commendable.</li>
<li>It is very important to know what investors actually want to know, what management is doing to achieve this, and how they should interact with investors in IR activities.</li>
</ul>


TSE plans to publish a list of companies that disclosed and those that are "under consideration" for disclosure in "Management Conscious of Cost of Capital and Stock Price." 
TSE's plan to introduce actual investor feedback on how investors view dialogue and engagement and what kind of information disclosure and IR they expect from companies is commendable.
It is very important to know what investors actually want to know, what management is doing to achieve this, and how they should interact with investors in IR activities.


Preparation in Advance for In-Depth Discussions Is Important for Both Investors and Managers

<ul>
<li>The baseless confidence of the 177 companies that finally moved to Standard Market that their market capitalization would increase in18 months was nothing more than a waste of time.</li>
<li>It is fine for a company to aim to be listed on the highest prime market, but high shareholder returns and quality management must come first.</li>
<li>If the listing criteria for prime market was JPY100 billion market capitalization, the gap with investors who initially expected prime market before the market restructuring would have been much smaller.</li>
</ul>


The baseless confidence of the 177 companies that finally moved to Standard Market that their market capitalization would increase in18 months was nothing more than a waste of time.
It is fine for a company to aim to be listed on the highest prime market, but high shareholder returns and quality management must come first.
If the listing criteria for prime market was JPY100 billion market capitalization, the gap with investors who initially expected prime market before the market restructuring would have been much smaller.


Prime Market Is Still the Market with the Most Listed Companies Even After 171 Companies Are Removed

<ul>
<li>Companies disclosing in English increased to 97.2% in 2023 prime market. However, only 15% of overseas investors responded "satisfied," indicating a continuing mismatch between disclosure content and investor needs.</li>
<li>TSE will prioritize the documents according to whether disclosure requires immediacy, and divide companies into mandatory companies and effort companies according to the size and foreign ownership of a company.</li>
<li>However, disclosure in English of lower priority documents would be more difficult. Separating companies would allow the prime market to include companies that don’t need to interact with global investors.</li>
</ul>


Companies disclosing in English increased to 97.2% in 2023 prime market. However, only 15% of overseas investors responded "satisfied," indicating a continuing mismatch between disclosure content and investor needs.
TSE will prioritize the documents according to whether disclosure requires immediacy, and divide companies into mandatory companies and effort companies according to the size and foreign ownership of a company.
However, disclosure in English of lower priority documents would be more difficult. Separating companies would allow the prime market to include companies that don’t need to interact with global investors.


The Problem Is that Companies that Don't Want to Do Disclosure in English Are Listed on Prime Market

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)

Why Should Policy Shares Be Viewed as Including Deemed Shares Held?

I would like to discuss the issues on policy shareholdings from the October 13 Nikkei article, "Aisin's resolve, will it break the bedrock of...

Metrical Inc

The ％ of Female Board Members Exceeding 30% Shows Whether the Company Is Truly Pursuing Diversity

I would like to discuss "Revision of the System for appointing Woman Board Members in the Prime Market" published by the TSE on October 11.

Metrical Inc

Preparation in Advance for In-Depth Discussions Is Important for Both Investors and Managers

I would like to discuss "Future Efforts Concerning "Measures to Achieve Management Conscious of Cost of Capital and Stock Price" and "Promotion and...

Metrical Inc

Prime Market Is Still the Market with the Most Listed Companies Even After 171 Companies Are Removed

I would like to discuss "Standard Market Re-selection of Prime Market Listed Companies" from the 12th Follow-up Meeting on the Revision of Market...

Metrical Inc

The Problem Is that Companies that Don't Want to Do Disclosure in English Are Listed on Prime Market

I would like to discuss the disclosure in English of Prime Market companies in the material of the 12th Follow-up Meeting on the Revision of Market...

Metrical Inc