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>In the past, dividends paid out of net income were often mistakenly regarded as “equity costs.” Consequently, many companies have adopted the concept of payout ratio as their dividend policy.</li>
<li>The increasing number of companies adopting dividend policy based on DOE may help curb the expansion of shareholders' equity, but it hasn't yet led to active use to raise ROE.</li>
<li>Few managers still understand that entire FCF belongs to shareholders. Due to the unfortunate history of dividends mistakenly viewed as “equity costs,” few companies clearly articulate their cash allocation strategies.</li>
</ul>


In the past, dividends paid out of net income were often mistakenly regarded as “equity costs.” Consequently, many companies have adopted the concept of payout ratio as their dividend policy.
The increasing number of companies adopting dividend policy based on DOE may help curb the expansion of shareholders' equity, but it hasn't yet led to active use to raise ROE.
Few managers still understand that entire FCF belongs to shareholders. Due to the unfortunate history of dividends mistakenly viewed as “equity costs,” few companies clearly articulate their cash allocation strategies.


Companies Unable to Escape the Curse of the Unfortunate History of Misunderstanding “Cost of Equity”

<ul>
<li>The gradual increase in the proportion of independent directors is partly due to the growing shift from companies with audit committees to companies with audit and supervisory committees.</li>
<li>Companies with audit committees tend to have more outside directors by design, yet they can delegate operational matters to inside directors. Consequently, companies don't strongly resist having more outside directors.</li>
<li>As more companies expand businesses globally, the number of foreign directors hasn't increased significantly. The reason for this lack of growth is the absence of specific targets set by regulators.</li>
</ul>


The gradual increase in the proportion of independent directors is partly due to the growing shift from companies with audit committees to companies with audit and supervisory committees.
Companies with audit committees tend to have more outside directors by design, yet they can delegate operational matters to inside directors. Consequently, companies don't strongly resist having more outside directors.
As more companies expand businesses globally, the number of foreign directors hasn't increased significantly. The reason for this lack of growth is the absence of specific targets set by regulators.


Election of Foreign Board Directors Is More Critical than ％ of Female Board Members

<ul>
<li>Although Net Profit Margin has been the most highly correlated of 3 components of ROE, improvements in Asset Turnover and Equity Ratio driven by share buybacks are now drawing attention.</li>
<li>In FY2026, once the temporary impact of U.S. tariffs has run its course, companies engaged in global business are expected to more aggressively repurchase their own shares alongside recovering profits.</li>
<li>The ROE derived from the aggregate profits and net assets of all companies differs by over 1% from the average ROE of individual companies, and this gap won't be narrow.</li>
</ul>


Although Net Profit Margin has been the most highly correlated of 3 components of ROE, improvements in Asset Turnover and Equity Ratio driven by share buybacks are now drawing attention.
In FY2026, once the temporary impact of U.S. tariffs has run its course, companies engaged in global business are expected to more aggressively repurchase their own shares alongside recovering profits.
The ROE derived from the aggregate profits and net assets of all companies differs by over 1% from the average ROE of individual companies, and this gap won't be narrow.


<ul>
<li>While more companies are now undertaking English-language disclosures compared to the past, many have merely implemented them without achieving level that truly helps overseas investors deepen understanding of management strategies.</li>
<li>Overseas investors seek qualitative explanations and information regarding long-term strategies, yet many companies are reluctant to proactively disclose such information in English, including “corporate governance information” and “long-term/growth strategies.”</li>
<li>Only a limited number of companies provide opportunities for top management to directly explain business strategies to overseas investors in English or for outside directors to meet with overseas investors.</li>
</ul>


While more companies are now undertaking English-language disclosures compared to the past, many have merely implemented them without achieving level that truly helps overseas investors deepen understanding of management strategies.
Overseas investors seek qualitative explanations and information regarding long-term strategies, yet many companies are reluctant to proactively disclose such information in English, including “corporate governance information” and “long-term/growth strategies.”
Only a limited number of companies provide opportunities for top management to directly explain business strategies to overseas investors in English or for outside directors to meet with overseas investors.


Many Companies Still Miss Opportunities to Deepen Investors' Understanding of Business Strategies

<ul>
<li>Financial statements and accompanying explanations alone provide insufficient information about the background of earnings results and guidance, so overseas investors seek qualitative and information about long-term strategies regarding earnings information.</li>
<li>Currently, only half of Prime Market-listed companies disclose full earnings releases in English. It's only natural that investors would want IR briefing materials to be disclosed in English as well.</li>
<li>Companies whose top management cannot communicate directly in English with overseas investors should provide simultaneous interpretation or written English translations for their investor relations presentations.</li>
</ul>


Financial statements and accompanying explanations alone provide insufficient information about the background of earnings results and guidance, so overseas investors seek qualitative and information about long-term strategies regarding earnings information.
Currently, only half of Prime Market-listed companies disclose full earnings releases in English. It's only natural that investors would want IR briefing materials to be disclosed in English as well.
Companies whose top management cannot communicate directly in English with overseas investors should provide simultaneous interpretation or written English translations for their investor relations presentations.


Disclosure in English Is a Way to Help Overseas Investors Better Understand Management Strategy

Japan

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TSE Tokyo Price Index TOPIX (TPX INDEX)

Companies Unable to Escape the Curse of the Unfortunate History of Misunderstanding “Cost of Equity”

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Metrical Inc

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I would like to discuss the issues on the September 12 Nikkei article titled “Male Inside Directors Drop to 50%: 90% of Prime Market Companies...

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What the Two ROEs Mean

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Many Companies Still Miss Opportunities to Deepen Investors' Understanding of Business Strategies

I would like to discuss the issues on the Nikkei article dated September 10 titled “Only 20% of Japanese Companies' Communications ‘Easy to...

Metrical Inc

Disclosure in English Is a Way to Help Overseas Investors Better Understand Management Strategy

I would like to discuss the materials disclosed by TSE on September 2 regarding the “Release of Survey Results on Disclosure in English for...

Metrical Inc