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Tokyo Exchange to implement stricter listing requirements for main board

The Tokyo Stock Exchange is set to implement new regulations for companies listed on its prestigious main board. The stricter requirements will force companies to abandon long-criticized practices such as cross-shareholding and cash hoarding.

The proposed reforms would be biggest overhaul has been done by the exchange for over a decade. The overhaul will include stricter listing criteria for the top category. Sources say about 30% of the 2,200 companies named on the main board do not meet the new listing criteria.

After investors called for tougher reforms, the exchange proposed a plan to increase filing requirements for companies currently listed on the main board. Part of the plan is to encourage better corporate governance and profitability standards, officials said. Part of the plan will also require companies to submit disclosures in English to attract more foreign investments.

Some of the requirements will be difficult for small-cap companies and those largely owned by parent corporations, analysts say. This includes stricter rules for liquidity, such as a requirement of at least $90 million in market capitalization for tradable shares and a tradable share ratio of 35% or more. above.

“Companies haven’t pushed for stock price increases in the past, but the new regulations are having a huge impact on their thinking,” said analysts at consulting firm IR Japan.

Sakai Heavy Industries – a company that sits on the main board – vows to stay at the top of the list. The company recently implemented stock buyback programs and adjusted its dividend payout ratio target to boost the share price.

“All we can do to meet the market cap requirement is increase the share price. We now plan to return excess capital to shareholders instead of hoarding it to increase returns on equity, a metric that investors care about,” said the company’s chief executive officer, Takao Yoshikawa.

The Tokyo Exchange said companies that do not meet the new requirements will still be allowed to submit applications to remain on the main market. They will be required to submit possible improvement plans that need approval.

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https://www.btimesonline.com/articles/150471/20210720/tokyo-exchange-to-implement-tighter-listing-requirements-for-main-board.htm | Tokyo Exchange to implement stricter listing requirements for main board

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