Where do Investor Relations Matter the Most?

65 Pages Posted: 26 Feb 2019 Last revised: 29 May 2019

See all articles by Francois Brochet

Francois Brochet

Boston University - Department of Accounting

Peter Limbach

University of Cologne and Centre for Financial Research (CFR)

Dmitry Bazhutov

BUW - Schumpeter School of Business and Economics

André Betzer

BUW- Schumpeter School of Business and Economics

Markus Doumet

BUW- Schumpeter School of Business and Economics

Date Written: May 27, 2019

Abstract

We test the hypothesis that the marginal benefit of investor relations (IR) is greater in countries where capital market institutions are generally less developed and tailored to a more concentrated ownership structure. Using a large panel of survey-based annual IR rankings of German and U.K. companies, we find that IR quality in Germany exhibits a positive association with capital market visibility, liquidity, and firm value and a negative one with information asymmetry, uncertainty, and the cost of equity capital – and significantly more so than in the U.K. In a broader European sample, we find that the benefits of IR accrue more significantly to firms located in countries where i) corporate ownership is more concentrated and ii) capital market institutions are weaker. Lastly, we find that the benefits of both public and private functions of IR are amplified in those countries. Overall, the evidence suggests that IR is associated with greater marginal benefits in markets where demand for this type of shareholder communication has been historically lower.

Keywords: Investor Relations, Transparency, Ownership Concentration, Firm Visibility, Information Asymmetry, Cost of Capital

JEL Classification: G14, M41

Suggested Citation

Brochet, Francois and Limbach, Peter and Bazhutov, Dmitry and Betzer, André and Doumet, Markus, Where do Investor Relations Matter the Most? (May 27, 2019). Available at SSRN: https://ssrn.com/abstract=3331936 or http://dx.doi.org/10.2139/ssrn.3331936

Francois Brochet (Contact Author)

Boston University - Department of Accounting ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

Peter Limbach

University of Cologne and Centre for Financial Research (CFR) ( email )

Albertus-Magnus-Platz
Köln, 50923
Germany

HOME PAGE: http://www.finance.uni-koeln.de

Dmitry Bazhutov

BUW - Schumpeter School of Business and Economics ( email )

Gaußstraße 20
42097 Wuppertal
Germany

André Betzer

BUW- Schumpeter School of Business and Economics ( email )

Gaußstraße 20
Wuppertal
Germany

HOME PAGE: http://finance.uni-wuppertal.de/index.php?id=1153

Markus Doumet

BUW- Schumpeter School of Business and Economics ( email )

Gaussstrasse 20
Wuppertal, 42119
Germany

HOME PAGE: http://finance.uni-wuppertal.de/

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