The Supply and Effectiveness of Investor Relations in Insider- vs. Outsider-Oriented Markets

Management Science, forthcoming

51 Pages Posted: 26 Feb 2019 Last revised: 16 Nov 2021

See all articles by Dmitry Bazhutov

Dmitry Bazhutov

BUW - Schumpeter School of Business and Economics

André Betzer

University of Wuppertal - Schumpeter School of Business and Economics

Francois Brochet

Boston University - Department of Accounting

Markus Doumet

BUW- Schumpeter School of Business and Economics

Peter Limbach

University of Bielefeld; Centre for Financial Research (CFR)

Date Written: November 14, 2021

Abstract

Using annual survey-based investor relations (IR) data for a panel of European companies, we document that the supply and effectiveness of IR varies with country- and firm-level demand. Relative to their industry peers, firms from insider-oriented countries have larger IR staff, which predicts better IR rankings. Better IR is associated with greater visibility, information assimilation, and valuation, with visibility and assimilation being significantly greater for firms from insider-oriented countries. Within such countries, firms with greater outsider orientation have higher capital market benefits. Furthermore, using MiFID II as a shock to analyst coverage, we find an incrementally larger association between IR and visibility in insider-oriented countries post 2017. Overall, the evidence suggests that the supply of IR in insider-oriented markets has reached a high level, acting as a viable mechanism to improve firms’ information environment. However, within those countries IR demand still varies significantly, with outsider-oriented firms showing greater IR effectiveness.

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

JEL Classification: G14, M41

Suggested Citation

Bazhutov, Dmitry and Betzer, André and Brochet, Francois and Doumet, Markus and Limbach, Peter, The Supply and Effectiveness of Investor Relations in Insider- vs. Outsider-Oriented Markets (November 14, 2021). Management Science, forthcoming, Available at SSRN: https://ssrn.com/abstract=3331936 or http://dx.doi.org/10.2139/ssrn.3331936

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

Francois Brochet (Contact Author)

Boston University - Department of Accounting ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

Markus Doumet

BUW- Schumpeter School of Business and Economics ( email )

Gaussstrasse 20
Wuppertal, 42119
Germany

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

Peter Limbach

University of Bielefeld ( email )

Centre for Financial Research (CFR) ( email )

Albertus-Magnus-Platz
Köln, 50923
Germany

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

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