Where does Investor Relations Matter the Most?

56 Pages Posted: 26 Feb 2019 Last revised: 28 Jan 2020

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

University of Wuppertal - Schumpeter School of Business and Economics

Markus Doumet

BUW- Schumpeter School of Business and Economics

Date Written: January 18, 2020

Abstract

Using a panel of survey-based annual investor relations (IR) rankings of European companies, we provide evidence suggesting that the marginal benefit of IR is greater in countries with capital markets that are less outside-shareholder oriented. For firms located in these countries, we find that IR quality is associated with significantly greater firm visibility, information assimilation, and valuation. The results hold for both the public and private functions of IR, and in terms of market reactions around conference presentations and analyst/investor days. Furthermore, using MiFID II as a shock to firms’ information environment, we find a significantly incremental association between IR and information assimilation as well as cost of capital in those countries post 2017. 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 does Investor Relations Matter the Most? (January 18, 2020). 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

University of Wuppertal - 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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