Investor Relations and Information Assimilation

57 Pages Posted: 12 Jul 2018

See all articles by Kimball Chapman

Kimball Chapman

Washington University in St. Louis - John M. Olin Business School

Gregory S. Miller

University of Michigan, Stephen M. Ross School of Business

Hal D. White

University of Notre Dame

Date Written: June 8, 2018

Abstract

Research has shown the importance of corporate disclosure and dissemination in reducing information asymmetry and improving market efficiency. However, while investors and analysts might receive corporate disclosures, they often need help with assimilating the information to better understand its implications for firm value. This paper examines whether investor relations (IR) officers provide value by facilitating the assimilation of firm information by the market. We find that firms with IR officers have lower stock price volatility, lower analyst forecast dispersion, higher analyst forecast accuracy, and quicker price discovery, consistent with IR officers aiding market participants in their assimilation of firm information. We also show that our findings are stronger for firms with longer-tenured IR officers. Finally, we find that when firms transition from a long-tenured IR officer to a new IR officer, stock price volatility increases, analyst forecasts become more disperse and less accurate, and the price discovery process slows, despite no significant change in the firm’s disclosures, media coverage, or performance around the turnover. Collectively, these findings suggest that in-house IR officers, particularly those with greater experience, help facilitate information assimilation by the market, which has positive market effects.

Keywords: Investor Relations; Information Assimilation; Information Processing

Suggested Citation

Chapman, Kimball and Miller, Gregory S. and White, Hal D., Investor Relations and Information Assimilation (June 8, 2018). Available at SSRN: https://ssrn.com/abstract=3200592 or http://dx.doi.org/10.2139/ssrn.3200592

Kimball Chapman (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Gregory S. Miller

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Hal D. White

University of Notre Dame ( email )

389C Mendoza College of Business
University of Notre Dame
Notre Dame, IN 46556
United States
574-361-3809 (Phone)

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