We, at GO Investment Partners, believe that in Japan a constructive and culturally sensitive “Japanese way” of engaging is much more effective over the long-term than a more aggressive, short-term approach.
This recent piece of academic research from the faculty of law at Oxford University corroborates our long held view and a core tenet of JEF’s investment policy. We quote:
” In a recent paper we investigate whether activist hedge fund interventions in Japan produced similarly positive and enduring outcomes to interventions in the USA. We benchmarked the success of interventions using indicators measuring management effectiveness, managerial decisions, labour management, and market perceptions. To do this we built a dataset of interventions in 117 Japanese companies targeted by 17 hedge funds considered to have an activist agenda at the end of 2007. We compared the experience of these targets to those of comparable Japanese firms at three points in time, around 2007 then at one and three years after that.
We defined our outcome variables as follows. ‘Managerial effectiveness’ was measured by reference to return on assets and return on equity. For ‘managerial decision making’ we looked at the ratio of dividends to total assets, leverage, the ratio of cash to total assets, and the ratio of capital expenditure to total assets. ‘Labour management’ was assessed by changes in labour productivity and wage intensity. Finally, market perception was measured by the log of market capitalisation and by Tobin’s Q.
One year on from the initial interventions, there was no significant effect on management effectiveness, as we have defined it”
A summary of the paper can be found here.
The full paper can be read here.