Wall Street Analysts as Investor Relations Officers
62 Pages Posted: 12 Oct 2017 Last revised: 7 Oct 2019
Date Written: October 4, 2019
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: Suggested Citation