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 revision of disclosure company lists to “TSE's request” seems aimed at helping companies promote their initiatives without losing heart, rather than presenting updates in clearer terms to institutional investors.</li>
<li>For institutional investors seeking to maximize investment performance among a number of investment targets, companies need estimates of the time taken to realize and the magnitude of the expected returns.</li>
<li>For slow-moving Japanese companies, private equity investment managers, who have longer investment horizons and easier access to a variety of exit strategies, would have a better picture of investment returns.</li>
</ul>


The revision of disclosure company lists to “TSE's request” seems aimed at helping companies promote their initiatives without losing heart, rather than presenting updates in clearer terms to institutional investors.
For institutional investors seeking to maximize investment performance among a number of investment targets, companies need estimates of the time taken to realize and the magnitude of the expected returns.
For slow-moving Japanese companies, private equity investment managers, who have longer investment horizons and easier access to a variety of exit strategies, would have a better picture of investment returns.


Private Equity Investment Managers Are Benefiting the Most from “Revised Disclosure Company List”

<ul>
<li>The fact that institutional investors hold large numbers of shares is a key factor in early disclosure of the convocation notice and the dispatch of the convocation notice in English.</li>
<li>There was no notable progress from last year in the early disclosure of convocation notices, the sending of convocation notices in English, and participation in the electronic voting platform.</li>
<li>Early submission of annual securities reports prior to the date of the AGM, which was expected by the FSA and others, increased only slightly.</li>
</ul>


The fact that institutional investors hold large numbers of shares is a key factor in early disclosure of the convocation notice and the dispatch of the convocation notice in English.
There was no notable progress from last year in the early disclosure of convocation notices, the sending of convocation notices in English, and participation in the electronic voting platform.
Early submission of annual securities reports prior to the date of the AGM, which was expected by the FSA and others, increased only slightly.


The Hurdles to Achieving Early Submission of Annual Securities Reports Before AGM Dates Are High

<ul>
<li>In response to TSE's request, more than 80% of the prime market listed companies disclosed their targets, but 3/4 of the companies have yet to disclose specific measures.</li>
<li>While a few companies (with high foreign ownership) have started to create value autonomously, 3/4 of prime market companies do not fit the concept of a prime market listed company.</li>
<li>The fact that managers who cannot think for themselves are gradually beginning to opt for MBOs indicates the potential for investors to be relieved of further patience.</li>
</ul>


In response to TSE's request, more than 80% of the prime market listed companies disclosed their targets, but 3/4 of the companies have yet to disclose specific measures.
While a few companies (with high foreign ownership) have started to create value autonomously, 3/4 of prime market companies do not fit the concept of a prime market listed company.
The fact that managers who cannot think for themselves are gradually beginning to opt for MBOs indicates the potential for investors to be relieved of further patience.


3/4 of Prime Market Companies Have yet to Disclose Specific Measures to Respond to “TSE's Request"

<ul>
<li>As overseas investors continue to account for 30% of shareholdings in the TSE, domestic institutional investors are the main reliance for listed companies to secure voting rights.</li>
<li>Companies with immature management kaizen activities are eager to avoid a change of mind in voting by domestic institutional investors until they are able to generate sufficient corporate value.</li>
<li>By investing 95% of its domestic equity assets in passive funds, the GPIF has not required many companies to make tough management improvements</li>
</ul>


As overseas investors continue to account for 30% of shareholdings in the TSE, domestic institutional investors are the main reliance for listed companies to secure voting rights.
Companies with immature management kaizen activities are eager to avoid a change of mind in voting by domestic institutional investors until they are able to generate sufficient corporate value.
By investing 95% of its domestic equity assets in passive funds, the GPIF has not required many companies to make tough management improvements


Will the Strategy of Trying to Buy Time by Negotiating Directly with Asset Owners Work?

<ul>
<li>The timing of disclosures by companies reviewed by audit firms has changed little from the previous year, but over the past five years it has gradually become earlier.</li>
<li>Although quarterly reports are unified into the disclosure of quarterly financial statements without mandatory reviews, many large companies disclose their financial statements with reviews, so the administrative burden doesn't decrease.</li>
<li>Many smaller companies that disclosed without review experienced a reduced burden, but their financial statements are relatively less reliable than those of larger companies that do have review.</li>
</ul>


The timing of disclosures by companies reviewed by audit firms has changed little from the previous year, but over the past five years it has gradually become earlier.
Although quarterly reports are unified into the disclosure of quarterly financial statements without mandatory reviews, many large companies disclose their financial statements with reviews, so the administrative burden doesn't decrease.
Many smaller companies that disclosed without review experienced a reduced burden, but their financial statements are relatively less reliable than those of larger companies that do have review.


Quarterly Reporting Review Results in Reliability in F/S Between Larger and Smaller Companies

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)

Private Equity Investment Managers Are Benefiting the Most from “Revised Disclosure Company List”

I would like to discuss the document disclosed by the TSE on September 27, “Measures to Achieve Management Conscious of Cost of Capital and Stock...

Metrical Inc

The Hurdles to Achieving Early Submission of Annual Securities Reports Before AGM Dates Are High

I would like to disclose the material disclosed by the TSE on September 20 regarding “Status of Annual General Meetings of Companies with Fiscal...

Metrical Inc

3/4 of Prime Market Companies Have yet to Disclose Specific Measures to Respond to “TSE's Request"

I have considered the issues on the September 18 Nikkei article, “Companies' P/B Improvement: Less than 30% Disclose Specific Measures, According...

Metrical Inc

Will the Strategy of Trying to Buy Time by Negotiating Directly with Asset Owners Work?

I would like to discuss the issues on the September 14 Nikkei Shimbun article, “GPIF and Other Public Pensions and Keidanren to Engage in Dialogue...

Metrical Inc

Quarterly Reporting Review Results in Reliability in F/S Between Larger and Smaller Companies

I would like to discuss the issues on the September 4 Nikkei Shimbun article, “Unification of Financial Statements, 20% of which are ‘Accountant...

Metrical Inc