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 government's policy to expand small investment tax exemption program is expected to lead to increase in stock investments. Individuals are keen to invest in stocks with higher performance potential.</li>
<li>Trading in U.S. equities is prominent among under-40s generation. It is a rational investment for these generations with higher risk tolerance to invest in foreign equities with higher expected returns.</li>
<li>Individuals no longer have a single choice of Japanese equities as they did during the bubble economy, but have begun to select their investment targets as one of global equities.</li>
</ul>


The government's policy to expand small investment tax exemption program is expected to lead to increase in stock investments. Individuals are keen to invest in stocks with higher performance potential.
Trading in U.S. equities is prominent among under-40s generation. It is a rational investment for these generations with higher risk tolerance to invest in foreign equities with higher expected returns.
Individuals no longer have a single choice of Japanese equities as they did during the bubble economy, but have begun to select their investment targets as one of global equities.


Japanese Companies Will Be Selected as One of Global Stocks for Individual Investors in near Future

<ul>
<li>The less frequently information is disclosed, the greater the impact of single disclosure on stock prices. Fewer quarterly disclosure reduces trading volume, which will have negative impact on stock valuations.</li>
<li>Companies listed on U.S. market will continue quarterly disclosure, while companies with limited human resources won't adopt quarterly disclosure. Even within the same sector, companies may adopt different disclosure attitudes.</li>
<li>Metrical's analysis shows that the IR factor is highly positively correlated with Tobin's q. Also, different disclosure stances may emerge depending on the ratio of foreign shareholders.</li>
</ul>


The less frequently information is disclosed, the greater the impact of single disclosure on stock prices. Fewer quarterly disclosure reduces trading volume, which will have negative impact on stock valuations.
Companies listed on U.S. market will continue quarterly disclosure, while companies with limited human resources won't adopt quarterly disclosure. Even within the same sector, companies may adopt different disclosure attitudes.
Metrical's analysis shows that the IR factor is highly positively correlated with Tobin's q. Also, different disclosure stances may emerge depending on the ratio of foreign shareholders.


The Attitude Toward Information Disclosure May Make a Further Difference in Stock Valuations

<ul>
<li>Both Kappa Kreate and ATOM are almost completely controlled by their parent company, ColoWide, and we cannot expect corporate governance practices that would actually be a relief to minority shareholders.</li>
<li>With the parent company in full control, the subsidiary's minority shareholders are likely to be aware that the interests of the parent take precedence over those of the minority shareholders.</li>
<li>Parent company shareholders shouldn't tolerate continuing to own subsidiaries that damage their interests. The problem isn't a problem of the interests of the subsidiary's shareholders, but of the parent's shareholders.</li>
</ul>


Both Kappa Kreate and ATOM are almost completely controlled by their parent company, ColoWide, and we cannot expect corporate governance practices that would actually be a relief to minority shareholders.
With the parent company in full control, the subsidiary's minority shareholders are likely to be aware that the interests of the parent take precedence over those of the minority shareholders.
Parent company shareholders shouldn't tolerate continuing to own subsidiaries that damage their interests. The problem isn't a problem of the interests of the subsidiary's shareholders, but of the parent's shareholders.


The Problem Isn’t for the Subsidiary Shareholders but for the Parent Company Shareholders

<ul>
<li>The benefit of issuing ESG bonds for retail investors is that they provide an investment opportunity for retail investors to become familiar with the ESG initiatives of individual issuers.</li>
<li>For the issuers, they can reduce issuance costs compared to institutional bonds. For the underwriting investment banks, the bonds are more profitable than institutional bonds because of higher sales fees.</li>
<li>Since ESG bonds for individuals have a maturity of 3-10 years, ESG factors such as the environment may have a short time to affect credit risk.</li>
</ul>


The benefit of issuing ESG bonds for retail investors is that they provide an investment opportunity for retail investors to become familiar with the ESG initiatives of individual issuers.
For the issuers, they can reduce issuance costs compared to institutional bonds. For the underwriting investment banks, the bonds are more profitable than institutional bonds because of higher sales fees.
Since ESG bonds for individuals have a maturity of 3-10 years, ESG factors such as the environment may have a short time to affect credit risk.


ESG Bonds for Individuals Matching Increased Issuance Intentions

<ul>
<li>The important thing is not whether the ROIC tool is used or not, but rather the risk-taking for investment and whether it resulted in sufficient returns.</li>
<li>A change in the outlook for improving profitability is necessary for the stock price to rise, and furthermore, a compelling growth policy and capital allocation can also be effective.</li>
<li>The fact that valuations have not risen sufficiently in the current situation infers that investors lack confidence in the path to improving profitability for each business.</li>
</ul>


The important thing is not whether the ROIC tool is used or not, but rather the risk-taking for investment and whether it resulted in sufficient returns.
A change in the outlook for improving profitability is necessary for the stock price to rise, and furthermore, a compelling growth policy and capital allocation can also be effective.
The fact that valuations have not risen sufficiently in the current situation infers that investors lack confidence in the path to improving profitability for each business.


ROIC Helps to Raise Transparency in Business, but Management Skills Are the Key to Improve Return

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)

Japanese Companies Will Be Selected as One of Global Stocks for Individual Investors in near Future

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The Attitude Toward Information Disclosure May Make a Further Difference in Stock Valuations

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The Problem Isn’t for the Subsidiary Shareholders but for the Parent Company Shareholders

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ESG Bonds for Individuals Matching Increased Issuance Intentions

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ROIC Helps to Raise Transparency in Business, but Management Skills Are the Key to Improve Return

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