Explainer-What is the Tokyo Exchange's new list of firms disclosing capital efficiency plans?
By Anton Bridge
TOKYO (Reuters) — The Tokyo Stock Exchange's (TSE) move to release a list of firms that have disclosed plans to increase their capital efficiency is its latest attempt to improve long-languishing Japanese valuations and attract overseas investors.
Over the past decade, both the TSE and the government have steadily pushed to improve governance at listed companies, efforts that investors have hailed as a remedy for the unusually high number of stocks that trade below book value, or less than the value of their assets.
The bourse's moves have strengthened optimism about the outlook for Japanese stocks, helping power the benchmark Nikkei to a 28% surge last year.
WHAT IS THE LIST?
From Monday, the TSE will begin releasing on a monthly basis a list of companies that have disclosed plans to increase their capital efficiency.
Companies have no legal obligation to disclose the plans and will not face punishment if they don't comply. Nevertheless, the publication of the list is expected to serve as a way to indirectly «name and shame» those who don't make the cut — and prompt them to take action.
WHY IS THE TSE CALLING FOR CHANGE?
For years Japan has struggled to shake off its reputation as a «value trap» — a market where stocks were cheap and will remain so.
Around half of Japan's listed companies trade below their book value. The TSE has taken an increasingly pro-active stance to combat that, tightening listing criteria for its «prime» section, raising the requisite market cap and free float, and applying more stringent disclosure rules around governance, diversity and sustainability.
The TSE called for better capital efficiency by listed companies in March, but only 20% of companies listed on the «prime»
Read more on investing.com
