Does Investor Relations Add Value?

41 Pages Posted: 23 Oct 2010

See all articles by Xijuan Angel Bellotti

Xijuan Angel Bellotti

Middlesex University

Vineet Agarwal

Cranfield University - School of Management

Elly Nash

affiliation not provided to SSRN

Richard Taffler

Manchester Business School

Date Written: September 12, 2010


IR professionals argue that good investor relations contributes to the “fair valuation of firms”. We test the proposition that effective communication of accounting and other firm-specific information enhances firm value directly employing a unique and large database of firms nominated for Investor Relations Magazine’s ‘best overall IR’ awards measuring investor relations quality. We find firms perceived by investment professionals as having superior IR have increased analyst following, and improved liquidity in the year after award nominations. Effective IR also leads to subsequent positive abnormal returns, and such firms are additionally rewarded with significantly higher valuation multiples within the Ohlson (1995) framework. Overall, our findings are strongest for smaller firms which are more likely to be ‘neglected’. Our evidence is consistent with good IR successfully reducing the risk to investors associated with high information asymmetry. We also find our results are unlikely to be driven by potential sample selection bias.

Suggested Citation

Bellotti, Xijuan Angel and Agarwal, Vineet and Nash, Elly and Taffler, Richard J., Does Investor Relations Add Value? (September 12, 2010). Available at SSRN: or

Xijuan Angel Bellotti (Contact Author)

Middlesex University ( email )

The Burroughs
London, NW4 4BT
United Kingdom
0208-411-5705 (Phone)


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)

Elly Nash

affiliation not provided to SSRN ( email )

Richard J. Taffler

Manchester Business School ( email )

Crawford House
Oxford Road
Manchester M13 9PL
United Kingdom

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