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 number of days to disclose first- and third-quarter financial results was 37.0 days, roughly the same timing as the previous year, regardless of whether reviews were conducted or not.</li>
<li>The larger market capitalization companies are more likely to conduct voluntary reviews, and the larger market capitalization companies are more positive about ensuring the reliability of their disclosure information.</li>
<li>Despite a slight increase from the previous year, only a little more than 10% of all companies disclosed cash flow statements in the first and third quarters.</li>
</ul>


The number of days to disclose first- and third-quarter financial results was 37.0 days, roughly the same timing as the previous year, regardless of whether reviews were conducted or not.
The larger market capitalization companies are more likely to conduct voluntary reviews, and the larger market capitalization companies are more positive about ensuring the reliability of their disclosure information.
Despite a slight increase from the previous year, only a little more than 10% of all companies disclosed cash flow statements in the first and third quarters.


No Disruption in Quarterly Disclosure Review, but a Few Companies Disclosed CF Statements in 1Q & 3Q

<ul>
<li>It's understandable that compensation is paid for managing a global business and achieving significant growth, but it's also paid for bloated performance in yen terms due to the weak yen.</li>
<li>Employee engagement is very important for value-added products and more money should be spent on human capital. Otherwise, higher profit margins are unlikely to be achieved.</li>
<li>The election of directors at AGMs rarely results in rejection of the company's proposal. Cross-shareholdings should be reduced so that managers whose “employment” is protected by cross-shareholdings don't receive commensurate compensation.</li>
</ul>


It's understandable that compensation is paid for managing a global business and achieving significant growth, but it's also paid for bloated performance in yen terms due to the weak yen.
Employee engagement is very important for value-added products and more money should be spent on human capital. Otherwise, higher profit margins are unlikely to be achieved.
The election of directors at AGMs rarely results in rejection of the company's proposal. Cross-shareholdings should be reduced so that managers whose “employment” is protected by cross-shareholdings don't receive commensurate compensation.


Fair for Managers Who Are Protected by Cross-Shareholding and Get Inflated Payout Due to Weak Yen?

Asia L/S Equity PM/Macro/Thematic Idea Generation

Rikki Malik

Cross Asset Strategy

<ul>
<li>With US bonds oversold, we expect the Japanese Yen to  strengthen</li>
<li>Supplementary Budget from the LDP as new cabinet's approval rating drops</li>
<li>The broad Japanese indices will struggle here as this plays out</li>
</ul>


With US bonds oversold, we expect the Japanese Yen to  strengthen
Supplementary Budget from the LDP as new cabinet's approval rating drops
The broad Japanese indices will struggle here as this plays out


Tactical Trading - JPY Weakness Has Likely Run Its Course for Now

<ul>
<li>There's gap in timelines for results between many companies that started to incorporate the cost of capital into their management and investors who are looking for results in investment performance.</li>
<li>If this gap surfaces, investor expectations will be stripped away. Companies that determine that it will take a long time to achieve results can be expected to consider going private.</li>
<li>For a company to seek access to institutional investors, it must first produce results. The race is on to achieve results within limited timeframes and faster than other companies.</li>
</ul>


There's gap in timelines for results between many companies that started to incorporate the cost of capital into their management and investors who are looking for results in investment performance.
If this gap surfaces, investor expectations will be stripped away. Companies that determine that it will take a long time to achieve results can be expected to consider going private.
For a company to seek access to institutional investors, it must first produce results. The race is on to achieve results within limited timeframes and faster than other companies.


After TSE's Request, the Key Is Whether the Company Can Deliver While Investors Are Still Hopeful

<ul>
<li>Business portfolio reforms are lagging and improving profitability, the driver of ROE, will take more time. Further Reducing policy shareholdings and cash on hand are needed to improve capital profitability.</li>
<li>In days of cross-shareholdings, management tended to be less conscious of the goal of sustainable growth in shareholder interests because they need not listen to opinions of other minority shareholders.</li>
<li>Cross-Shareholdings have decreased, and management is now required to be more conscious of capital profitability. ”TSE's request” will hopefully prevent this change from going backwards.</li>
</ul>


Business portfolio reforms are lagging and improving profitability, the driver of ROE, will take more time. Further Reducing policy shareholdings and cash on hand are needed to improve capital profitability.
In days of cross-shareholdings, management tended to be less conscious of the goal of sustainable growth in shareholder interests because they need not listen to opinions of other minority shareholders.
Cross-Shareholdings have decreased, and management is now required to be more conscious of capital profitability. ”TSE's request” will hopefully prevent this change from going backwards.


Reducing Cross-Shareholdings Returns Companies to Basics of Sustained Growth in Shareholder Returns

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)

No Disruption in Quarterly Disclosure Review, but a Few Companies Disclosed CF Statements in 1Q & 3Q

I would like to discuss the issues on disclosure by TSE on September 5, “Disclosure Trends of Quarterly Financial Statements after the Revision of...

Metrical Inc

Fair for Managers Who Are Protected by Cross-Shareholding and Get Inflated Payout Due to Weak Yen?

I would like to discuss the issues of the August 6 article, “Top Management Compensation at Japanese Companies Highest in Three Consecutive Years,...

Metrical Inc

Tactical Trading - JPY Weakness Has Likely Run Its Course for Now

With US government bonds oversold, the Japanese Yen is expected to strengthen causing the major Japanese indices to continue to tread water

Rikki Malik

After TSE's Request, the Key Is Whether the Company Can Deliver While Investors Are Still Hopeful

I would like to discuss the TSE's August 30 disclosure “Future Measures Concerning ‘Measures to Achieve Management Conscious of Cost of Capital and...

Metrical Inc

Reducing Cross-Shareholdings Returns Companies to Basics of Sustained Growth in Shareholder Returns

I would like to discuss the issues on the August 28 Nikkei Shimbun article, “Policy shareholding sales top 3.6 trillion yen; Toyota and Hitachi...

Metrical Inc

No Disruption in Quarterly Disclosure Review, but a Few Companies Disclosed CF Statements in 1Q & 3Q

I would like to discuss the issues on disclosure by TSE on September 5, “Disclosure Trends of Quarterly Financial Statements after the Revision of...

Metrical Inc

Fair for Managers Who Are Protected by Cross-Shareholding and Get Inflated Payout Due to Weak Yen?

I would like to discuss the issues of the August 6 article, “Top Management Compensation at Japanese Companies Highest in Three Consecutive Years,...

Metrical Inc

Tactical Trading - JPY Weakness Has Likely Run Its Course for Now

With ​US government bonds oversold, the Japanese Yen is expected to strengthen causing the major Japanese indices to continue to tread water

Rikki Malik

After TSE's Request, the Key Is Whether the Company Can Deliver While Investors Are Still Hopeful

I would like to discuss the TSE's August 30 disclosure “Future Measures Concerning ‘Measures to Achieve Management Conscious of Cost of Capital and...

Metrical Inc

Reducing Cross-Shareholdings Returns Companies to Basics of Sustained Growth in Shareholder Returns

I would like to discuss the issues on the August 28 Nikkei Shimbun article, “Policy shareholding sales top 3.6 trillion yen; Toyota and Hitachi...

Metrical Inc

With US government bonds oversold, the Japanese Yen is expected to strengthen causing the major Japanese indices to continue to tread water