Tag: METRICAL

The AGM season for the March fiscal year end companies is approaching as most of Japanese companies hold it in June, while some companies cannot have finalized the financial reporting yet due to the spread of novel coronavirus infectious diseases (COVID-19). In recent years, an increasing number of companies have moved the date of the AGM up from the end of June (historically majority of companies have held it on Thursday of the last week in June), and many companies are providing and disclosing notices of convocation of general meetings of shareholders in English. Also, although the articles of incorporation must be changed, an increasing number of companies are allowing electronic voting. These are very good initiatives for shareholders and investors. Metrical evaluates how the companies enhance the IR information disclosure as well as such above items as the AGM/IR criteria. For reference, the correlation between AGM/IR factor and key performance measures such as ROE (actual), ROA (actual) and Tobin’s Q is shown below. Especially in Tobin’s Q, the significant positive correlation of this factor is remarkable. Obviously, a company with a higher AGM/IR scores, such as higher IR information disclosure and accessibility to annual general meeting of shareholders would be traded at a higher share price in the market. This result could encourage those who are in charge of IR at a public company above all.

The market price in April 2020 has recovered significantly from the previous month when it continued to decline significantly due to concerns over the spread of new corona infections. The world market price turned to an increase as the US stock prices rose from expectations for good clinical trials of corona drugs. Both Topix and JPX400 stock indexes have risen for the first time in four months since January, recovering 4.54% and 4.60% respectively in the last month. CG rating score Top20 stock price was slightly underperforming with 4.15%. The volatility (standard deviation) for the current month is 7.65%, 7.74%, 4.11% for Topix, JPX400, and CG Top20 stocks, respectively.

We have observed the number of female directors as a key factor on board practices to measure how a company is willing to change. The table below shows the correlation analysis between the number of female directors and performance key measures such as ROE (actual), ROA (actual) and Tobin’s Q on the 1,755 companies as of March 31, 2020. We have seen the statistically significant positive correlation between ROE (actual or results) and the factor since we started the correlation analysis with correlation analysis with BDTI in 2017. Now, the factor shows the sign of significance to ROA (actual or results) in this month, updating the data of December fiscal year end companies after AGMs.

The market price in March 2020 continued to fluctuate with high fluctuations due to concerns about the spread of the Coronavirus around the world. Approximately half of the sharp decline by mid-month recovered at the end of the month. Both Topix and JPX400 stocks have fallen sharply in March for the month of -6.46% and -6.79% respectively. The Top20 CG rating score was -6.22%, outperforming the previous month at -0.30% compared to the two main stock indices, with a lower rate of decline. By the way, the stock prices of the ten companies with the top 10 CG rating scores were -1.44%, which was even smaller.

In February 2020, prices fell sharply in the world’s major stock markets by the end of the month, fearing that the spread of the coronavirus could spread to various parts of the world. Both Topix and JPX400 stock indices have fallen sharply to -0.59% and -0.57% respectively in the month of February. The Top20 CG rating score was -0.38%, outperforming the previous month, keeping the decline rate lower than both major stock indices. The stock prices of the 10 companies with the top 10 CG rating scores fell even less, at -0.34%.

Of the CG practice, Takeover defense is one of the criteria that companies have improved since the Corporate Governance Code in June 2015. The following table shows that comparison of about the data of 1,800 Japanese companies between March 2018 and February 2020.

Topics

• 50%
  INEDs increased 1 company (Yamada Consulting [4792]) to 85 (86 companies
  including Toshiba) from the previous month.
• A
  significant positive correlation was found between board practices and value
  creation (ROE, ROA, Tobin’s q) in the following

(Positive
correlation with actual ROE)

• Ratio of female directors and
  ROE results
• Incentive (compensation) plan
  factors and ROE achievements