Professor Hideaki Miyajima: Activist Shareholders and Companies: Improving the Effectiveness of Management Reform

“…the probability of the success of activism (as described above) accompanied by official requests for activity has not yet reached that of Europe and the United States but has risen to 40%. In addition, the cumulative abnormal return (CAR) when such requests are accepted is about 6%, the same as in the United States and Europe….

Finally, let us consider the keys to improving corporate governance in Japan in the future. First, on the corporate side, it is important for management to renew its commitment to dialogue with the increasingly diverse range of institutional investors that are participating in the market. It is important for managers to engage in dialogue with deserving investors who are not ruled by short-term interests, to explain the validity of their strategies through serious dialogue, and to implement necessary reforms.

On the investor side, the focus should be on engagement through collaborative action. The revision of the Stewardship Code in 2017 stated that group engagement through collective action among shareholders may be “beneficial in some cases.” However, depending on how information is conveyed, problems related to insider trading regulations may also occur. Furthermore, depending on the content of the engagement, investors may be considered joint owners under the Large Shareholding Reporting System. In determining the possibilities of collective engagement, an important challenge going forward will be clarifying to what extent specific practices related to these matters are permitted.”

Please click here to read the full article by Professor Miyajima.

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