How do Young Firms Choose Among Different Modes of Investor Communications?
University of Toronto - Accounting
February 1, 1999
This paper analyzes how managers of young firms choose among various modes of investor communications, using data on analyst presentations, management earnings forecasts, press releases and corporate finance disbursements for a sample of 645 post-IPO firms. Firms that plan to access capital markets initiate investor communications through analyst presentations. Firms with high return volatility make management earnings forecasts as their first act of investor communications. Firms with low return volatility and increasing earnings communicate by initiating dividends. Undervalued firms use repurchases to initiate their communication. Further, firms in poor information environments are more likely to use corporate financial disbursements to solve information asymmetry problems. The results show that the modes of investor communications differ from each other, with firms choosing the mode that best suits their communications objective.
Number of Pages in PDF File: 52
JEL Classification: M41, M45, G35working papers series
Date posted: March 8, 1999
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