Wall Street Analysts as Investor Relations Officers

62 Pages Posted: 12 Oct 2017 Last revised: 7 Oct 2019

See all articles by Ole-Kristian Hope

Ole-Kristian Hope

University of Toronto - Rotman School of Management

Zhongwei Huang

Cass Business School, City, University of London

Rucsandra Moldovan

John Molson School of Business, Concordia University

Date Written: October 4, 2019

Abstract

This paper examines the practice of hiring financial analysts as investor relations officers (IRO). We posit that analysts-turned-IROs have a competitive advantage in communicating with investors, thereby lowering the effort expended by the investment community to process corporate disclosures. Using a unique manually-collected dataset on the employment history of IROs (compiled from LinkedIn, Capital IQ, RelationshipScience.com, and appointment press releases) and a difference-in-differences research design with matched control sample, we first show that 8-K disclosure readability improves after firms hire former analysts as IROs through reductions in length, complexity, and the proportion of uncertain financial terms. We also find some evidence that these companies are more likely to host analyst/investor days. Most importantly, we find increases in analyst following, institutional investors, and stock liquidity after hiring a former analyst as IRO. Overall, our findings suggest that firms benefit from hiring Wall Street analysts as IROs.

Keywords: investor relations, financial analysts, disclosure, information environment, institutional investors, stock liquidity, accounting

JEL Classification: G30, M10, M41, M51

Suggested Citation

Hope, Ole-Kristian and Huang, Zhongwei and Moldovan, Rucsandra, Wall Street Analysts as Investor Relations Officers (October 4, 2019). 2018 Canadian Academic Accounting Association (CAAA) Annual Conference. Available at SSRN: https://ssrn.com/abstract=3051149 or http://dx.doi.org/10.2139/ssrn.3051149

Ole-Kristian Hope (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

HOME PAGE: http://www.rotman.utoronto.ca/FacultyAndResearch/Faculty/FacultyBios/Hope.aspx

Zhongwei Huang

Cass Business School, City, University of London ( email )

Northampton Square
London, EC1V 0HB
United Kingdom

Rucsandra Moldovan

John Molson School of Business, Concordia University ( email )

Montreal, Quebec H3G 1M8
Canada
+1-514-848-2424 ext 2528 (Phone)

HOME PAGE: http://https://sites.google.com/site/rucsandramoldovan

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