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>This article more directly examines whether the momentum of improvement in corporate governance practices is related to stock returns.</li>
<li>Significant positive correlations are shown between changes in Metrical score and changes in market capitalization, changes in foreign ownership, changes in ROA (past 3-years average) and changes in Tobin's q.</li>
<li>Not every year sees the same degrees of improvement in corporate governance as the current year. In 2021, CG Code was revised and the prime-market-listing-standards adopted some items from it.</li>
</ul>


This article more directly examines whether the momentum of improvement in corporate governance practices is related to stock returns.
Significant positive correlations are shown between changes in Metrical score and changes in market capitalization, changes in foreign ownership, changes in ROA (past 3-years average) and changes in Tobin's q.
Not every year sees the same degrees of improvement in corporate governance as the current year. In 2021, CG Code was revised and the prime-market-listing-standards adopted some items from it.


Japan's Governance: Do Companies that Changed Corporate Governance Rating Have Higher Stock Returns?

<ul>
<li>This article asks the question, "Do companies with high corporate governance ratings have high stock returns?" I would like to discuss by using the Metrical Score to evaluate corporate governance.</li>
<li>Companies with higher Metrical Scores tend to have increased market capitalization from December 2020 to February 2022, showing significant positive correlation between Metrical Scores and change in equity market capitalizations.</li>
<li>Metrical has been monitoring the stock returns of top 20 Metrical Score companies since 2015. The top 20 composites have outperformed both TOPIX and JPX400 indexes on a cumulative basis.</li>
</ul>


This article asks the question, "Do companies with high corporate governance ratings have high stock returns?" I would like to discuss by using the Metrical Score to evaluate corporate governance.
Companies with higher Metrical Scores tend to have increased market capitalization from December 2020 to February 2022, showing significant positive correlation between Metrical Scores and change in equity market capitalizations.
Metrical has been monitoring the stock returns of top 20 Metrical Score companies since 2015. The top 20 composites have outperformed both TOPIX and JPX400 indexes on a cumulative basis.


Japan's Governance: Do Companies with High Corporate Governance Ratings Have High Stock Returns?

<ul>
<li>Regarding "ESG Funds Performance" featured in Rapid Response, I would like to consider it in conjunction with an article on ESG funds that was published in Nikkei on February 6.</li>
<li>In fact, ESG funds are already underperforming when it comes to active funds. It is believed that there have been issues with stock picks.</li>
<li>As far environment, Metrical doesn’t believe in excluding it because it is in energy/commodities sector. We look at how the company is thinking and acting and moving forward on ESG.</li>
</ul>


Regarding "ESG Funds Performance" featured in Rapid Response, I would like to consider it in conjunction with an article on ESG funds that was published in Nikkei on February 6.
In fact, ESG funds are already underperforming when it comes to active funds. It is believed that there have been issues with stock picks.
As far environment, Metrical doesn’t believe in excluding it because it is in energy/commodities sector. We look at how the company is thinking and acting and moving forward on ESG.


Japan's Governance: ESG Fund Considerations

<ul>
<li>I would like to explore again how companies that have chosen the prime market have improved their corporate governance practices by the degree of improvement in ROA.</li>
<li>Improvements in corporate governance practices for companies that improved ROA by more than 2% were advanced in many of the criteria other than items that newly stated in listing criteria.</li>
<li>Companies that have improved their profitability may have confirmed that they have begun to move toward more effective use of cash and assets. If so, there are signs of hope.</li>
</ul>


I would like to explore again how companies that have chosen the prime market have improved their corporate governance practices by the degree of improvement in ROA.
Improvements in corporate governance practices for companies that improved ROA by more than 2% were advanced in many of the criteria other than items that newly stated in listing criteria.
Companies that have improved their profitability may have confirmed that they have begun to move toward more effective use of cash and assets. If so, there are signs of hope.


Japan's Governance: Improvement in Governance of Companies that Chose Prime Market in ROA Change

<ul>
<li>According to data disclosed by TSE, the number of companies participating in the electronic voting platform increased 530 companies from 1,010 in June 2021 to 1,540 as of March 4.</li>
<li>Looking at the 1,540 companies by new market-segment, 92.8% of the companies chose the prime market, which is greatly influenced by "electronic voting platform" requirement in prime market listing criteria.</li>
<li>Based on the selected market results published by TSE, 77.7% of the companies that chose prime market are participating in the electronic voting platform, while 22.3% are not yet participating.</li>
</ul>


According to data disclosed by TSE, the number of companies participating in the electronic voting platform increased 530 companies from 1,010 in June 2021 to 1,540 as of March 4.
Looking at the 1,540 companies by new market-segment, 92.8% of the companies chose the prime market, which is greatly influenced by "electronic voting platform" requirement in prime market listing criteria.
Based on the selected market results published by TSE, 77.7% of the companies that chose prime market are participating in the electronic voting platform, while 22.3% are not yet participating.


Japan's Governance: Electronic Voting Platform

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: Do Companies that Changed Corporate Governance Rating Have Higher Stock Returns?

This article will discuss more directly whether the momentum of improvements in corporate governance practices positively influence stock returns.

Metrical Inc

Japan's Governance: Do Companies with High Corporate Governance Ratings Have High Stock Returns?

This article will ask, "Do companies with high corporate governance ratings have high stock returns?" and examine the stock performance by using...

Metrical Inc

Japan's Governance: ESG Fund Considerations

Regarding "ESG Funds Performance" featured in Rapid Response, I would like to share my thoughts on it in conjunction with an article on ESG funds...

Metrical Inc

Japan's Governance: Improvement in Governance of Companies that Chose Prime Market in ROA Change

This analysis revealed something that could not be found in the overall analysis of the firms that selected the prime market by focusing on the...

Metrical Inc

Japan's Governance: Electronic Voting Platform

On March 4, Tokyo Stock Exchange disclosed "Update on Participating Companies of Electronic Voting Platform". This article would like to discuss...

Metrical Inc