In the midst of a drive for businesses to enhance governance, a survey revealed that about half of Japanese companies are considering reviewing or reorganizing their operations to increase company value, including acquisitions.
The survey's findings are the most recent indication of the kind of major actions that businesses in the third-largest economy of the world are trying to implement to improve their business operations and increase company value.
The Tokyo market has reached its highest point in thirty years on the expectation that corporations will increase shareholder returns through share buybacks, the unwinding of crossholdings, and other measures.
The Tokyo Stock Exchange is pressuring businesses to examine how they use capital because almost half of listed companies are trading below book value. On Monday, the exchange released a list of corporations that plan to place pressure on laggards.
While the TSE includes businesses that have created or are exploring action plans, the survey shows steps under consideration.
Just under one third of the 104 companies surveyed stated they were considering mergers and acquisitions as a means of integrating their core businesses and other businesses, while about a quarter were considering the sale of non-essential businesses.
A participant from the wholesale industry stated that their company was considering merging with downstream companies in order to facilitate restructuring. According to someone else, the goal was to increase corporate scale via proactive mergers and acquisitions.
Companies responded to the survey on the condition of anonymity to enable them to talk more freely. Nikkei Research conducted the survey from December 22 to January 12.
Japan is about to embark on a decade of profound change. It is set to enter a golden age, according to Jefferies analyst Atul Goyal, who earlier stated in a client note that structural change fueled by new mandates from the government and TSE would optimise the allocation of capital.
Businesses that responded to a survey conducted last year said that they felt higher costs associated with listing, with management buyouts in Japan having increased as companies try to evade pressure from shareholders.
By increasing the amount of money that can be invested tax-free under the Nippon Individual Savings Account program, Japan hopes to boost family income from investments starting in January.
In consideration of the expansion, 15% of businesses in the most recent study said that they were thinking about raising dividends or had already done so, while a smaller percentage said that they were considering buybacks or stock splits.