Page 13 - DIY Investor Magazine | Issue 39
P. 13

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Nov 2023
DIY Investor Magazine ·
  DIFFERENT PACED MEASURES TO IMPROVE CORPORATE VALUE
The TSE wants companies to achieve sustainable growth and enhanced corporate value over the mid-to-long-term. There are many ways to do this, but some of them may take time.
The TSE itself gives the example of “investment in R&D and human capital that leads to the creation of intellectual property and intangible assets that contribute to sustainable growth, investment in equipment and facilities, and business portfolio restructuring”.
While these longer-term initiatives are needed for sustainable growth, there are measures that can help to boost corporate value in the near term too. For example, unwinding some of the cross-shareholdings that many listed Japanese firms hold in each other should deliver a faster benefit.
Cross-shareholdings have been criticised for contributing to management complacency, discouraging risk-taking and making companies less responsive to the needs of smaller shareholders.
Many Japanese banks have already sold their cross- shareholdings and other companies are now following suit amid the pressures coming from the corporate governance code and investors themselves.
‘THESE ARE A QUICK WAY FOR COMPANIES TO DELIVER A TANGIBLE BENEFIT’
The unwinding of these cross-shareholdings can also provide capital for other shareholder-friendly measures such as increased dividends or share buybacks. These are a quick way for companies to deliver a tangible benefit of the type being sought by the TSE, while they also focus on actions with a longer time horizon.
   PROMISING SIGNS ON INFLATION
Next, let’s take a look at the macroeconomic backdrop. After a prolonged period of low or even negative inflation since the 1990s, the post-pandemic pick-up in inflation has been more welcome in Japan than elsewhere. The latest (August) inflation reading showed an annual rate of 3.2% – above the Bank of Japan’s 2% target but not as dramatically high as has been seen in other countries.






















































































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