Where does Investor Relations Matter the Most?
56 Pages Posted: 26 Feb 2019 Last revised: 28 Jan 2020
Date Written: January 18, 2020
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: Suggested Citation