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Japanese corporations are getting pressure from shareholders to spend money more efficiently. Not many Japanese companies are very willing to distribute cash to shareholders as dividends. They see these fund as resources to expand business overseas.

9 Comments

Akifusa Takada, head of the M&A practice at the Baker McKenzie law firm in Tokyo.

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It is only reasonable for them to hold you accountable for your belief that by expanding overseas, you can attain a greater return than they can other wise attain from the cash dividend.

0 ( +0 / -0 )

Last year, we took on a consultancy for a Japanese company trying to expand overseas. We guided them through it for two months, before canceling the contract due to their inability to be flexible in their thinking, and adapt their business methods to deal with overseas markets. I wasn't willing to waste any more of our time, or their money, on what I could clearly see was only going to fail.

Japanese companies sometimes have a problem understanding that in the same way foreign companies often/usually fail in Japan when they fail to adapt to the Japanese market, Japanese companies will also do poorly in foreign markets if they do not adapt to that foreign market.

6 ( +7 / -1 )

Not many Japanese companies are very willing to distribute cash to shareholders as dividends. 

They say that big dividends are a sign of a company out of ideas looking to shore up their share price with demand from retirees looking for dividend income.

Its not always a good sign.

You can't afford to offer significant dividends if you want to stay ahead in today's market unless you have a defacto monopoly or massive market share.

-2 ( +1 / -3 )

Acquisition of another company, especially cross border deals, are very difficult. I’ve seen a report by a major strategy consultancy that the success rate (as defined by accomplishing various KPIs set aside pre deal) at 30%. I cannot say if Japanese companies are better or worse than this, but these are not great odds. I also saw an article in the FT or the WSJ a few years ago that Japanese buyers typically pay a premium of 15-20%. So perhaps paying dividends, or at least increasing it from the current low yields, would be what the shareholders would prefer.

1 ( +2 / -1 )

They could give more of their windfall to their workers, who are consumers. The workers would spend more, raising private demand in the economy leading to higher and sustainable GDP growth. Nah, better not. The billionaires wouldnt like it.

You can't afford to offer significant dividends if you want to stay ahead in today's market...

"Today's market" has furnished companies with the highest profits in human history. They can "afford" that and much, much more.

6 ( +7 / -1 )

Do a share buy back, share price goes up everyone wins.

-4 ( +0 / -4 )

The CEO and other managers are just the hired help, they do not own the company. The money made and held by companies belongs to the shareholders. The owners of a company are entitled to expect a decent return on their investment. Share buybacks are very popular with the management of companies as a large chunk of their remuneration is in shares, so the owners money is used to temporarily inflate the share price, the money is gone, the managers make a killing, the company is no better off in fact worse off and the owners gain nothing as the share price reverts to normal or some external event causes the market to slide and all that money has been wasted. Dividends are real money in your hands (or your pension fund). Companies that can consistently pay dividends and rising dividends over a long period of time are well managed profitable companies. Boosting the share price is often illusory, look at Enron.

0 ( +1 / -1 )

englisc: That not correct, an increase in share price is created because there are less shares, it is also a way for companies too fool stupid media that just look at numbers. It is exactly what Apple do.

0 ( +0 / -0 )

Gogogo, yes there are less shares and theoretically that may cause the shares to rise as there are less but it is not in reality that simplistic, there are many other factors, and it is still the hired help who primarily benefit from spending the owners money.

0 ( +0 / -0 )

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