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>Following promotion of collaborative engagement, which was demanded by investors, the law will now be amended to allow companies to request disclosure of beneficial shareholders, which was requested by companies.</li>
<li>This is due to the fact that the company is wary of overseas investors as the cross-shareholding structure begins to crumble and the foreign ownership remains at a high level.</li>
<li>Under the guise of “to activate engagement,” it is expected that SR activities will become more active in order to address proxy voting.</li>
</ul>


Following promotion of collaborative engagement, which was demanded by investors, the law will now be amended to allow companies to request disclosure of beneficial shareholders, which was requested by companies.
This is due to the fact that the company is wary of overseas investors as the cross-shareholding structure begins to crumble and the foreign ownership remains at a high level.
Under the guise of “to activate engagement,” it is expected that SR activities will become more active in order to address proxy voting.


Will the Legal Reform of Substantial Shareholder Disclosure Change the Voting Practices?

<ul>
<li>The increase in stock splits can be attributed to TSE requesting more effective measures from companies after market restructuring and to more companies whose stock prices have risen.</li>
<li>Companies are obsessed with getting individual investors on their side. It seems that the interests of companies and TSE are aligned in conducting stock splits to increase individual investors' shareholdings.</li>
<li>Now that many companies want to increase the number of individual investors, it may be a good time to resolve the cost issue and consider changing the share unit system.</li>
</ul>


The increase in stock splits can be attributed to TSE requesting more effective measures from companies after market restructuring and to more companies whose stock prices have risen.
Companies are obsessed with getting individual investors on their side. It seems that the interests of companies and TSE are aligned in conducting stock splits to increase individual investors' shareholdings.
Now that many companies want to increase the number of individual investors, it may be a good time to resolve the cost issue and consider changing the share unit system.


Stock Splits Meet Many Companies' Needs to Increase the Shareholdings of Individual Investors

<ul>
<li>While the company's attitude toward shareholder returns has been positive, the 11% dividend increase is not expected to reduce cash on hand by much.</li>
<li>In a condition where so much cash has accumulated, it's not a bad idea to use DOE as a guide to avoid accumulating cash on hand above a certain level.</li>
<li>Since FY3/2025 profits will grow in non-manufacturers, which has relatively low profit margin, the overall profit margin of companies won't increase. Therefore, unless assets are reduced significantly, ROE will soft.</li>
</ul>


While the company's attitude toward shareholder returns has been positive, the 11% dividend increase is not expected to reduce cash on hand by much.
In a condition where so much cash has accumulated, it's not a bad idea to use DOE as a guide to avoid accumulating cash on hand above a certain level.
Since FY3/2025 profits will grow in non-manufacturers, which has relatively low profit margin, the overall profit margin of companies won't increase. Therefore, unless assets are reduced significantly, ROE will soft.


Significant Share Buybacks Are Key to Improving Profitability of Capital

<ul>
<li>Many companies that cannot meet listing criteria have challenges with their tradable stock market capitalization in Prime markets, both in Standard markets, and tradable share ratios in Growth markets.</li>
<li>As a result of the market restructuring, the role of regional securities exchanges became a “receptacle” for ensuring trading of shares of companies that cannot meet the TSE listing criteria.</li>
<li>For a company that considers the purpose of a stock listing to be to improve the company's credibility and name recognition, going private or an MBO isn't on their mind.</li>
</ul>


Many companies that cannot meet listing criteria have challenges with their tradable stock market capitalization in Prime markets, both in Standard markets, and tradable share ratios in Growth markets.
As a result of the market restructuring, the role of regional securities exchanges became a “receptacle” for ensuring trading of shares of companies that cannot meet the TSE listing criteria.
For a company that considers the purpose of a stock listing to be to improve the company's credibility and name recognition, going private or an MBO isn't on their mind.


Transition to Regional Stock Exchange Means Continued Unhappy History for Shareholders

<ul>
<li>A common feature of the three companies that clearly indicated the conditions for implementing share repurchases and their position in the cash allocations is high foreign ownership.</li>
<li>Japanese companies' share buybacks are less than 10% of net income, but on a cash flow basis, taking depreciation into account, share buybacks would be much less.</li>
<li>If the cost of capital was calculated, it shouldn't be tremendous requirement to indicate cash allocation and share repurchase terms necessary for targeted return on capital and corporate value.</li>
</ul>


A common feature of the three companies that clearly indicated the conditions for implementing share repurchases and their position in the cash allocations is high foreign ownership.
Japanese companies' share buybacks are less than 10% of net income, but on a cash flow basis, taking depreciation into account, share buybacks would be much less.
If the cost of capital was calculated, it shouldn't be tremendous requirement to indicate cash allocation and share repurchase terms necessary for targeted return on capital and corporate value.


Big Gap Between Companies that “don't Have a Gap in Investors' Viewpoints” and Those that Don't

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)

Will the Legal Reform of Substantial Shareholder Disclosure Change the Voting Practices?

I would like to discuss the January 29th Nikkei Shimbun article, “Law to be amended to make it easier to identify ‘beneficial shareholders’ and to...

Metrical Inc

Stock Splits Meet Many Companies' Needs to Increase the Shareholdings of Individual Investors

I would like to discuss the issues on the January 21 Nikkei article, “211 Stock Splits, Highest Level in Seven Years, ‘Price Drop’ for High-Priced...

Metrical Inc

Transition to Regional Stock Exchange Means Continued Unhappy History for Shareholders

I would like to discuss the issues on the January 29 Nikkei article, “TSE ‘transitional measures’ companies to go to regional stock exchanges as...

Metrical Inc

Big Gap Between Companies that “don't Have a Gap in Investors' Viewpoints” and Those that Don't

I would like to discuss the issues on the January 23 Nikkei article, “Share Buybacks are ‘Investment,’ Ajinomoto and Hitachi Judge by Returns."

Metrical Inc

Will the Legal Reform of Substantial Shareholder Disclosure Change the Voting Practices?

I would like to discuss the January 29th Nikkei Shimbun article, “Law to be amended to make it easier to identify ‘beneficial shareholders’ and to...

Metrical Inc

Stock Splits Meet Many Companies' Needs to Increase the Shareholdings of Individual Investors

I would like to discuss the issues on the January 21 Nikkei article, “211 Stock Splits, Highest Level in Seven Years, ‘Price Drop’ for High-Priced...

Metrical Inc

Significant Share Buybacks Are Key to Improving Profitability of Capital

I would like to discuss the issues on the January 29th Nikkei Newspaper article, “Corporate Dividends Hit Record 18 Trillion Yen, Benefiting...

Metrical Inc

Transition to Regional Stock Exchange Means Continued Unhappy History for Shareholders

I would like to discuss the issues on the January 29 Nikkei article, “TSE ‘transitional measures’ companies to go to regional stock exchanges as...

Metrical Inc

Big Gap Between Companies that “don't Have a Gap in Investors' Viewpoints” and Those that Don't

I would like to discuss the issues on the January 23 Nikkei article, “Share Buybacks are ‘Investment,’ Ajinomoto and Hitachi Judge by Returns."

Metrical Inc