Month: January 2022

In the previous article, “What Kind of Firm Adopts Takeover Defenses? (Metrical Analysis Using BDTI Data)” we used data from BDTI to analyze the performance and corporate governance practices of companies that have and have not adopted takeover defense measures. The results of the analysis showed that of the 421 companies found to have proposed anti-takeover measures at shareholder meetings since 2014, those companies that have not adopted anti-takeover measures now have superior performance in terms of ROE, ROA, and P/B, as well as in terms of the percentage of independent directors and the percentage of female directors as corporate governance practice metrics.

In BDTI’s data, 443 companies were confirmed to have proposed anti-takeover measures at their shareholders meetings since 2014, of which 10 were rejected and 433 were approved (see table below). As can be seen from the table below, once a takeover defense measure is proposed as an agenda item, it is usually approved. Whether the proposal is approved or rejected depends on the composition of the company’s shareholders, and mainly on the shareholding ratio of foreign shareholders. The TSE’s disclosure document “White Paper on Corporate Governance 2021” also states, “In terms of foreign shareholding ratio, the ratio of companies that have adopted takeover defense measures is lowest in the category of foreign shareholding ratio of 30% or more, at 2.7%, a decrease of 3.7 percentage points from the previous survey. The percentage of holdings in the 20% to 30% category was 9.2%, a significant decrease of 11.1 percentage points from the previous survey. Looking at the relationship with the ownership ratio of the largest shareholder, there was a tendency for the adoption ratio to be higher in the category where the ownership ratio of the largest shareholder is low, while the ratio in the category where the ownership ratio is less than 5% was 13.8%, a significant decrease of 9.5 percentage points from the previous survey.”

As shown in the table below, of the 433 companies that were confirmed to have proposed anti-takeover measures in their shareholder meetings since 2014, 421 are still listed on the stock exchange. Of these companies, 41% (173 companies) do not currently have takeover defense measures, and 59% (248 companies) still have takeover defense measures. As noted above, companies that do not currently have takeover defenses show superior performance and corporate governance practices. Furthermore, in terms of market capitalization, there is a significant difference between companies that do not currently have takeover defenses and those that still do.

Metrical updates its corporate governance evaluations every month for approximately 1,700 companies listed on the 1st Section of the Tokyo Stock Exchange with market capitalization exceeding approximately 10 billion yen. 2021 saw the revision of the Corporate Governance Code in line with the reorganization of the TSE’s market segments in April 2022. It is expected that initiatives to enhance the corporate governance of listed companies will also move forward. I would like to take a look at how far corporate governance has improved as a result of these efforts, with numbers.

The chart below shows Metrical’s evaluation of each criteria in December 2020 and their changes in December 2021, showing how far the corporate governance initiatives of listed companies have improved over the past year. Let’s take a look at them in order.

The first chart shows the distribution of the Metrical CG score, which is an overall assessment of a listed company across a number of corporate governance criteria. The distribution of the green bars in December 2021 is higher than that of the orange bars in December 2020, indicating that the score has shifted to the right. It can be assumed that listed companies have made progress in their corporate governance efforts, partly due to the revision of the Corporate Governance Code. Let’s take a closer look at the details below.