Author: Aki Matsumoto

Metrical provides monthly corporate governance assessments of approximately 1,700 companies with market capitalization exceeding approximately 10 billion yen, primarily those listed on the TSE 1st Section. This year, continuing on from last year, I would like to see how far listed companies have progressed in their corporate governance efforts over the past year.

The chart below shows the changes in each of the evaluation items for approximately 1,700 companies in the Metrical Universe over the past 3 years (December 2020, December 2021, and December 2022). Metrical divides the evaluation items into Board Practices and Key Actions. This time, I will look at the Board Practices section. Let’s take a look at them in order.

The first chart shows the distribution of Metrical CG scores, which represent the overall corporate governance rating of a listed company across a number of corporate governance measures. The distribution of scores in December 2022 is indicated by purple bars. distribution of the bars shows that the distribution of the bars moves to the right (toward higher scores) with each subsequent year, from December 2020, December 2021, and December 2022. It can be inferred that listed companies have advanced their corporate governance initiatives in response to the revision of the Corporate Governance Code in 2021 and the market reorganization of the TSE in 2022. Let’s take a look at the contents of these efforts by evaluation item below.

The TSE disclosed the Survey of the Status of Disclosure in English as of the end of July 2022 on August 3, 2022, and I would like to discuss the issues.

At the beginning of the disclosure document, the TSE states the following In the beginning of the disclosure report: “In order to clarify the situation after the transition to the new market classification in April 2022, we conducted a survey as of July 2022 and compiled the results of the survey. For companies listed on the Prime Market, a market for companies focused on constructive dialogue with global investors, the percentage of companies disclosing in English reached 92.1% (85.8% as of December 31, 2021), indicating that listed companies have made some progress in English-language disclosure since the transition to the new market classification. On the other hand, even for timely disclosure documents (excluding financial statements) and annual securities reports, which were required to be disclosed in English by more than 70% in the survey of overseas investors conducted last year, the percentage of companies listed on the prime market that disclose in English is still less than half. The Corporate Governance Code, which has been in effect since the transition to the new market classification, states that “Prime market listed companies, in particular, should disclose and provide required information in English in their disclosure documents” (the second sentence of Supplementary Principle 3-1). Further progress is expected toward expanding the scope and content of English-language disclosure and eliminating differences in the timing of disclosure.”

As stated in the statement in the TSE’s summary of survey results above, many listed companies in the prime market translate some documents into English. The increase in the number of companies disclosing in English can be evaluated to a certain extent. However, the fact is that the TSE has only just begun, and as the TSE also states in the latter part of the statement, very few companies are disclosing important disclosure documents, such as annual securities reports, in English. The importance of the annual securities report is further increased by the fact that sustainability items are planned to be included in the report from the next fiscal year, instead of being submitted quarterly. Below are the results of TSE’s survey.

November stocks rallied in favor of the higher U.S. stock market on the back of lower U.S. long-term interest rates. The CG Top 20 stock price underperformed both the TOPIX and JPX400 for the first time in three months.

November stocks began the month buoyed by a buy-back and then rallied on the back of the U.S. stock market, which climbed on the lower long-term U.S. interest rates as investors became more risk oriented due to the FOMC meeting summary released on November 23, which suggested a slowdown in the pace of interest rate hikes. Topix recovered to the 2,000-point level on a closing basis for the first time in about 10 months since January 12. Toward the end of the month, the market remained cautious, anticipating Chairman Powell’s speech and the upcoming employment data.
TOPIX and JPX400 indexes performed well in November, rising 2.94% and 3.36%, respectively. The CG Top 20 stock prices underperformed both indices this month with a gain of 1.47%.
Over the long term since 2014, the CG Top20 continues to outperform both indices by about 2% per year. Note that the CG Top20 has been reassessing its component stocks since July 1. The new individual stocks are listed in the table below.

August stock prices rose sharply until the first half of the month as the U.S. stock market rallied on expectations of an early end to monetary tightening in the U.S. Toward the end of the month, the market turned highly volatile as the U.S. stock market fell on the concern about longer-than-expected U.S. monetary tightening. The CG Top 20 outperformed both TOPIX and JPX400 during the month.

Until mid-August, the stock market rallied in favor of the U.S. stock market, which rose on expectations of an early end to the U.S. monetary tightening due to the U.S. economic recession speculation. In the latter half of the month, market volatility increased due to concerns about the U.S. FED’s long-term monetary tightening. The TOPIX and JPX400 indexes gained 1.53% and 1.33%, respectively, during the month of August, while the CG Top20 index outperformed both indices, rising 1.66%. The table below shows the components of the CG Top 20 as reviewed on July 1.