Tokyo Stock Exchange — Status of Disclosure
Now that we are through the AGM season, the main catalyst driving the Tokyo Stock Exchange-listed companies into compliance with the “Action to Implement Management that is Conscious of Cost of Capital and Stock Price” has disappeared. There is a certain quiet period now, at least until the TSE publishes its next corporate governance report, which should be expected by the end of August if it follows last year’s schedule.
As of June 30, 2024, 74% of Prime Market listed companies and 28% of Standard Market listed companies have disclosed information regarding “Action to Implement Management that is Conscious of Cost of Capital and Stock Price” — the TSE would like you to believe the numbers are 81% and 40%, respectively, but we have always refused to accept the “under consideration” into the count. This whole exercise has been going on for close to 18 months, and any executive team that is still “considering” voluntary compliance with the guidelines deserves the boot from its shareholders — which they are now safe from for another year.
The TSE also provides above breakdown for the Prime Market by market capitalization and price-book-ratio (PBR), stating that “while disclosure progress is further along among companies with low PBRs and large market capitalizations, companies with PBRs of 1.0x or more and companies with relatively small market capitalizations are also making progress in disclosure” (the same rules apply for us here, eliminating the “under consideration” from the count).
Especially when it comes to the lower market capitalization bracket(s), it might not make sense to aim for 100% compliance either, as some of these names will not be liquid enough to be considered tradable, which would apply to an even greater extend to the Standard Market.
Hence, the perspective of the TSE might shift from quantity to quality, including timely English disclosures. The TSE has given some indication of their intent by publishing a report in February that was intended to provide listed companies with reference material. This report was based on interviews with many investors in Japan and overseas, including a summary of the key points of initiatives that investors expect from companies, and also examples of initiatives that investors deemed as fulfilling these expectations. We expect this line of thought to be continued in the upcoming corporate governance report.
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