Ryohei Yanagi: The CFO Who Asked What the Rest of the Share Price Is Made Of

On 31 March 2023 the Tokyo Stock Exchange asked every company on its Prime and Standard markets to run the business with an eye on cost of capital and share price, and to disclose what it was doing about it (JPX). The request did not name price-to-book, but that was the subject: a large share of listed Japanese companies trade below the accounting value of their own assets.

Ryohei Yanagi had spent the previous decade on a different question about the same ratio. He wanted to know what the part above one is made of.

His answer became the framework Japanese finance now calls the Yanagi Model.

The hypothesis

“I created the ‘Yanagi Model’ based on the hypothesis that the added value of ESG is reflected in the portion of PBR above 1x,” Yanagi told Nomura Asset Management (Nomura Asset Management).

Book value is what the accounting system can see: plant, inventory, cash, receivables. Everything else a company is worth, its people, research pipeline, reputation and licence to operate, sits outside the ledger and inside the share price. On that reading, non-financial capital accounts for most of the number the market quotes.

Yanagi also has a view on where Japan should be: “the level of PBR 1x is too low, and it should be more in-line with developed countries at PBR 2x or higher, given Japan’s strength as a nation.”

Many people have said something similar. Yanagi tested it on a company he was personally accountable for.

The Eisai regressions

Yanagi was CFO of Eisai, the Tokyo pharmaceutical company. While there he ran the firm’s own ESG data against its own valuation history.

The study covered 88 ESG key performance indicators against price-to-book over a 28-year comparison period, with time-series data averaging more than 1,000 entries across 12 years. Nearly 20 of those indicators showed a delayed positive effect on corporate value, arriving five to ten years after the spending (Yanagi and Michels-Kim, IMA Strategic Finance).

Two results got the most attention from boards:

• A 10% increase in human capital investment was associated with a PBR roughly 14% higher, five years later, at 95% confidence.
• A 10% increase in R&D spending was associated with long-term value of approximately ¥200 billion over a ten-year horizon.

The KPIs with the strongest significance were not the ones a communications team would have picked. Consolidated personnel expenses and the employment rate of people with disabilities came in under a 1% p-value; the share of women in management positions and employee health metrics under 5%.

The effect is delayed. Human capital spending shows up in the valuation five years out, R&D at ten. On a quarterly reporting cycle, both look like pure cost at the moment the decision is made.

The limit built into the method

The published dialogue with Nomura Asset Management states the catch itself: the model “is complex and requires insider information,” which makes it “difficult to apply to a large number of companies.”

The Eisai study worked because the CFO running it could reach 12 years of internal KPI data no external analyst can see: headcount economics, health metrics, disability employment rates, R&D allocation by programme. An investor screening a thousand names from outside has vendor ESG scores and a filing.

For a company, that is a reason to collect its own non-financial data properly, since the analysis only exists if the data does. For the market, it is the case for the disclosure regimes now landing across Japan and Europe: they are what makes this kind of analysis possible from outside.

From one company to the market

A model built on one issuer’s internal data invites an obvious objection. Eisai is Eisai.

In December 2024, Yanagi and a team of co-authors published an application of the same method to the broader Japanese market: TOPIX-listed companies, 35,758 company-years across FY2004 to FY2022, screened against 54 ESG indicators split 17 environmental, 19 social and 18 governance. Between 35% and 50% of those indicators showed a statistically significant relationship with shareholder value in the pooled regression model. Social indicators performed strongest, with metrics around the ratio of female executives and directors showing particularly strong significance (Amova Asset Management).

The same study reports fewer significant results under a fixed-effects specification than under the pooled model. A pooled regression can pick up differences between companies that a within-company specification strips out. The direction of the evidence holds in both; the strength depends on the specification.

For a Japanese CFO defending a training budget or a diversity target to an investor who wants to know what it returns, “35 to 50% of ESG indicators correlate with shareholder value across nineteen years of TOPIX data” is a different sentence to have available than “it is the right thing to do.”

Why a technology summit covers an accounting model

Yanagi’s work is an argument about human capital made in the vocabulary of corporate finance, and it ends up deciding whether a company can fund the investment at all. Problems of that shape, sitting between disciplines, are what Tech for Impact Summit programmes.

Yanagi joined the Tech for Impact Summit programme in Tokyo in 2024 and again in 2026. He teaches at Waseda University’s Graduate School of Accountancy as a visiting professor, serves as an executive advisor at Abeam Consulting and as deputy president of M&G Investments Japan, advises the Tokyo Stock Exchange, and sat on the G7 Impact Taskforce in 2021. He holds a doctorate in economics from Kyoto University and an MBA with distinction from Thunderbird. Institutional Investor’s investor voting named him the best CFO in Japan’s healthcare sector five times during his tenure at Eisai (Tech for Impact Summit speaker profile).

His books include Corporate Governance and Value Creation in Japan (Springer, 2018) and the fourth edition of CFO Policy (Chuo Keizai, 2025).

The model does not ask anyone to change their beliefs. It asks them to look at a regression table. A board that will not sit through an argument about purpose will usually sit through a p-value.

The 2027 summit

Tech for Impact Summit returns to Tokyo on 18–19 May 2027, as a partner event of SusHi Tech Tokyo. It is an invitation-only executive gathering of leaders from business, policy, capital and culture.

If the intersection of capital and impact is the room you want to be in, join the 2027 waitlist and we will be in touch about an invitation.