Achivemment of Japanese corporate governance reform and Challeng of Japanese corporate management Takeshi Kadota
January 17,2025
The following is my memo as captioned for our meeting
with Head of CIO office of Canadian Public Pension Fund.
with Head of CIO office of Canadian Public Pension Fund.
Japanese corporate governance reform
We introduced Japanese corporate governance code
in 2015 where corporate management is urged to focus
on improving ROE which preferably shall be around 8%.
We estimate the current average level ROE of Japanese
firms has increased substantially after the introduction
by various ways of corporate challenges and efforts .
Through revisions of the code discussion was extended
to cover issues of cost of capital required for each firm
to reflect its business risk and needs of rationalizing
business portfolio as well as to be equipped with substantial
number of independent directors at the board .
Two years ago Tokyo Stock Exchange asked corporate
management to pay attention to PBR (ratio of stock price
per book value ) to have higher stock prices effectively
reflecting increased corporate value by the reform.
Recent stock price rise is also brought around by increasing
activists' engagement and potential TOB and M&A activities.
Japanese corporate management sophistication
Facing Japanese macro environment of low growth and
aging society , corporate management shall try to increase
corporate value by adopting proper strategy matching
with nvironmental changes by rationalizing business
portfolio and activating digitalization as well as to accelerate
technological innovation and to develop global business in their
competitive area . We are observing increase in
strategic M&A among Japanese corporations of
traditional business to improve operational efficiency .
Current low level of Japanese firms' financial leverage
is favorable for those challenge.
Takeshi KADOTA , Founder Director, ICGJ
We introduced Japanese corporate governance code
in 2015 where corporate management is urged to focus
on improving ROE which preferably shall be around 8%.
We estimate the current average level ROE of Japanese
firms has increased substantially after the introduction
by various ways of corporate challenges and efforts .
Through revisions of the code discussion was extended
to cover issues of cost of capital required for each firm
to reflect its business risk and needs of rationalizing
business portfolio as well as to be equipped with substantial
number of independent directors at the board .
Two years ago Tokyo Stock Exchange asked corporate
management to pay attention to PBR (ratio of stock price
per book value ) to have higher stock prices effectively
reflecting increased corporate value by the reform.
Recent stock price rise is also brought around by increasing
activists' engagement and potential TOB and M&A activities.
Japanese corporate management sophistication
Facing Japanese macro environment of low growth and
aging society , corporate management shall try to increase
corporate value by adopting proper strategy matching
with nvironmental changes by rationalizing business
portfolio and activating digitalization as well as to accelerate
technological innovation and to develop global business in their
competitive area . We are observing increase in
strategic M&A among Japanese corporations of
traditional business to improve operational efficiency .
Current low level of Japanese firms' financial leverage
is favorable for those challenge.
Takeshi KADOTA , Founder Director, ICGJ
- at 09:25
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