Category

ESG

Dec 16
0

Daily Brief ESG: For Companies Surviving on TOPIX and more

By | Daily Briefs, ESG

In today’s briefing:

  • For Companies Surviving on TOPIX, Resolving Cross-Shareholdings and Achieving Growth Are Essential

For Companies Surviving on TOPIX, Resolving Cross-Shareholdings and Achieving Growth Are Essential

By Aki Matsumoto

  • Even when the TOPIX constituents are narrowed down to 1,200 stocks, the impact on market capitalization differs between those that remain and those that do not.
  • Measures to increase the free-float market capitalization (20 billion yen level) used in the TOPIX calculation criteria involve reducing fixed shares such as cross-shareholdings and raising stock prices.
  • Presenting a compelling performance outlook that demonstrates the expansion of corporate value is key to increasing market capitalization, and showing signs of this in recent performance is paramount.

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Dec 15
0

Daily Brief ESG: Raising the Quality of Listed Companies Is Quite Challenging for the Nagoya Stock Exchange and more

By | Daily Briefs, ESG

In today’s briefing:

  • Raising the Quality of Listed Companies Is Quite Challenging for the Nagoya Stock Exchange

Raising the Quality of Listed Companies Is Quite Challenging for the Nagoya Stock Exchange

By Aki Matsumoto

  • Among companies failing the listing criteria for Standard Market and Growth Market, many that cannot meet 1 billion yen tradable shares market capitalization criteria will migrate to Nagoya Stock Exchange.
  • These companies failed to grow market capitalization. For these companies, the purpose of going public may have been to increase their visibility and credibility than to achieve growth after listing.
  • Companies migrating from TSE to other markets face a significant hurdle in achieving growth and improving corporate governance to enhance management transparency, especially when institutional investor engagement is lacking.

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Dec 13
0

Daily Brief ESG: Will Substantive Reforms to Governance Be Postponed Again This Time for Building a Track Record? and more

By | Daily Briefs, ESG

In today’s briefing:

  • Will Substantive Reforms to Governance Be Postponed Again This Time for Building a Track Record?

Will Substantive Reforms to Governance Be Postponed Again This Time for Building a Track Record?

By Aki Matsumoto

  • Transitioning to company with audit and supervisory committee is neutral for governance improvement, but the reason governance improvement hasn’t decisively improved is that few companies adopt the US-type 3-committee structure.
  • Currently, discussions are underway on company with US type 3 Committees, specifically the proposal that “only when outside directors constitute majority, shall the authority to determine nominations reside with theBOD.”
  • This resembles the situation when companies established audit committees prioritized demonstrating improvements in corporate governance over substantive enhancements to corporate governance itself.

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Dec 10
0

Daily Brief ESG: Publishing “Case Studies of Overcoming Challenges” Is Effective and more

By | Daily Briefs, ESG

In today’s briefing:

  • Publishing “Case Studies of Overcoming Challenges” Is Effective, But It Alone Is Not Sufficient

Publishing “Case Studies of Overcoming Challenges” Is Effective, But It Alone Is Not Sufficient

By Aki Matsumoto

  • “Case studies of overcoming challenges” are effective in Japan, where peer pressure is strong. As a starting point for discussion, they will lead to management practices that enhance future value.
  • Regarding challenges in initiatives outlined in “Survey Results for Companies,” responses indicating challenges in formulating medium-to-long-term capital policies, reviewing business portfolios, and identifying growth opportunities ranged from 20% to 49%.
  • More variable compensation for executives to increase alignment with shareholders’ perspectives, and stricter voting by institutional investors on director election proposals are also necessary.

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Dec 08
0

Daily Brief ESG: Markets Serving as a Landing Place for Companies Failing to Meet Listing Criteria Will Lose Quality and more

By | Daily Briefs, ESG

In today’s briefing:

  • Markets Serving as a Landing Place for Companies Failing to Meet Listing Criteria Will Lose Quality

Markets Serving as a Landing Place for Companies Failing to Meet Listing Criteria Will Lose Quality

By Aki Matsumoto

  • The most common reason companies fail to meet listing maintenance standards is insufficient tradable shares market capitalization for Prime and Standard Markets, and insufficient market capitalization growth for Growth Market.
  • Many companies failing to meet listing maintenance standards on Prime/Growth Market will transition to Standard Market. Those failing to meet Standard market’s criteria will seek to transition to regional exchanges.
  • Most companies failing to meet the listing maintenance standards on the Standard Market can transfer to regional exchanges, but 14 companies face difficulties even in transferring to regional exchanges.

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Dec 06
0

Daily Brief ESG: Raising the Standard of Discipline Among Companies Listed on the Standard Market Is Crucial and more

By | Daily Briefs, ESG

In today’s briefing:

  • Raising the Standard of Discipline Among Companies Listed on the Standard Market Is Crucial

Raising the Standard of Discipline Among Companies Listed on the Standard Market Is Crucial

By Aki Matsumoto

  • Many companies failing to meet listing maintenance standards will transition to Standard Market. Given the inherent risk of moral hazard, strengthening the discipline of listed companies is a critical point.
  • Companies that have migrated to or remained in the Standard Market for various reasons harbor moral hazard stemming not from diversity, but rather from gathering in pursuit of lax standards.
  • If more companies view TSE’s increased disclosure requirements as a cost of listing and consider going private, that’s positive development. Hopefully, this will lead to progress in resolving “parent-subsidiary listings.”

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Dec 03
0

Daily Brief ESG: To Improve the Quality of Listed Companies and more

By | Daily Briefs, ESG

In today’s briefing:

  • To Improve the Quality of Listed Companies, Every Effort to Promote Going Private Is Necessary

To Improve the Quality of Listed Companies, Every Effort to Promote Going Private Is Necessary

By Aki Matsumoto

  • TSE plans to revise the listing maintenance criteria for its Growth Market to “market capitalization of over 10 billion yen within 5 years of listing,” with announcement scheduled for December.
  • The problem lies not with companies listing on the growth market itself, but with the increasing number of non-growing companies listing on the growth market.
  • Few companies exit the market, not just the growth market, which is why many companies lack growth mindset. Revising listing maintenance standards may slightly increase the number of companies exiting.

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Dec 01
0

Daily Brief ESG: Criticism of Shareholder Proposals from Activist Investors Is a Comforting Word for Management and more

By | Daily Briefs, ESG

In today’s briefing:

  • Criticism of Shareholder Proposals from Activist Investors Is a Comforting Word for Management

Criticism of Shareholder Proposals from Activist Investors Is a Comforting Word for Management

By Aki Matsumoto

  • Of foreign shareholding in 30% range, 1% is held by activist funds. Meanwhile, the cross-shareholding is around 10%, and ETFs held by BoJ account for 7% of TSE market capitalization.
  • Passing shareholder proposals remains difficult, as conditions must align: a company must have fairly high foreign ownership, and its conduct must be bad that domestic institutions can endorse the proposal.
  • Claiming that “shareholder proposals from activist investors often target short-term profit-seeking initiatives” merely serves as a comforting excuse for executives who are postponing management challenges.

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Nov 29
0

Daily Brief ESG: Stock Prices Driven by Expectations Require Support from Actual Corporate Performance and more

By | Daily Briefs, ESG

In today’s briefing:

  • Stock Prices Driven by Expectations Require Support from Actual Corporate Performance

Stock Prices Driven by Expectations Require Support from Actual Corporate Performance

By Aki Matsumoto

  • The P/B ratio, which rose alongside the stock price increase, climbed to 1.4 in October 2025, but this merely matched the level seen from February 2024 to May 2024.
  • Despite stagnant actual EPS, BPS and ROE, rising stock prices pull up P/E and P/B. Correlation with P/B suggests that appealing to expectations of stock prices—over actual numbers—is more effective.
  • Whether current valuations are reasonable or if there is further upside potential depends on changes in future expectations and how these are factored into actual results.

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Nov 27
0

Daily Brief ESG: Who Benefits from Hoarding Cash Without Implementing Measures to Boost Profit Margins? and more

By | Daily Briefs, ESG

In today’s briefing:

  • Who Benefits from Hoarding Cash Without Implementing Measures to Boost Profit Margins?

Who Benefits from Hoarding Cash Without Implementing Measures to Boost Profit Margins?

By Aki Matsumoto

  • For years, overseas investors have raised concerns about management’s lack of awareness regarding fiduciary duty to fulfill corporate value growth and shareholder returns, which are integral to maximizing shareholder interest.
  • While the weak yen has certainly increased the “foreign currency translation adjustment” and impacted ROE, it has also had a positive effect on profits.
  • Among the three components of ROE, Net Profit Margin showed the highest correlation. There is a problem with accumulating cash on the balance sheet without investing to improve profit margins.

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