The Impact of Effective Investor Relations on Market Value

25 Pages Posted: 9 Mar 2008  

Vineet Agarwal

Cranfield University - School of Management

Angel Liao

affiliation not provided to SSRN

Richard Taffler

Manchester Business School

Elly Nash

affiliation not provided to SSRN

Date Written: March 4, 2008

Abstract

In this first study to test formally the market value of investor relations (IR) activity, we employ the annual US Investor Relations Magazine Investor Relations Awards from 2000 to 2002 to proxy for the quality of firm investor relations. We find firms perceived to have the most effective IR strategies earn superior abnormal returns, both before and after the nominations. This shows that while the nominations themselves may be influenced by past performance to some extent, they are nonetheless also associated with subsequent positive abnormal returns. We also find that not surprisingly, higher analyst following is associated with more nominations suggesting analysts tend to favour the stocks they follow. Consistent with effective IR leading to lower information risk, liquidity of nominated firms increases in the year subsequent to the nominations. Overall, our evidence is consistent with effective IR successfully reducing risks associated with high information asymmetry, as predicted by information risk and agency theories.

Keywords: investor relations, stock liquidity, asymmetric information

JEL Classification: G14, G19, G29

Suggested Citation

Agarwal, Vineet and Liao, Angel and Taffler, Richard and Nash, Elly, The Impact of Effective Investor Relations on Market Value (March 4, 2008). Available at SSRN: https://ssrn.com/abstract=1102644 or http://dx.doi.org/10.2139/ssrn.1102644

Vineet Agarwal

Cranfield University - School of Management ( email )

Bedfordshire, MK43 0AL
United Kingdom
00 44 (0) 1234 754543 (Phone)
00 44 (0) 1234 752554 (Fax)

Angel Liao

affiliation not provided to SSRN ( email )

Richard J. Taffler (Contact Author)

Manchester Business School ( email )

Crawford House
Oxford Road
Manchester M13 9PL
United Kingdom

Elly Nash

affiliation not provided to SSRN ( email )

Paper statistics

Downloads
1,346
Rank
10,665
Abstract Views
4,790