Wall Street Analysts as Investor Relations Officers

52 Pages Posted: 4 Mar 2021

See all articles by Ole-Kristian Hope

Ole-Kristian Hope

University of Toronto - Rotman School of Management

Zhongwei Huang

Fudan University - School of Management

Rucsandra Moldovan

John Molson School of Business, Concordia University

Date Written: January 14, 2021

Abstract

This paper examines the practice of hiring financial analysts as investor relations officers (IRO). We posit that analysts-turned-IROs (AIROs) have a competitive advantage in communicating with investors, thereby lowering the effort expended by the investment community to process corporate disclosures. Using a unique manually-collected dataset on the employment history of IROs (compiled from LinkedIn, Capital IQ, RelationshipScience.com, and appointment press releases), we show that disclosure readability in 8-K and 10-K filings improves and that companies are more likely to host analyst/investor days after hiring former analysts as IROs. Most importantly, we find increases in analyst following, institutional investors, and stock liquidity after hiring a former analyst as IRO. We conclude that both a disclosure and a network channel are at play in the relation between AIROs and increased interest from the investment community. Overall, our findings suggest that firms benefit from hiring Wall Street analysts as IROs.

Keywords: Investor relations, financial analysts, disclosure, information environment, institutional investors, stock liquidity, accounting

JEL Classification: G30, M10, M41, M51

Suggested Citation

Hope, Ole-Kristian and Huang, Zhongwei and Moldovan, Rucsandra, Wall Street Analysts as Investor Relations Officers (January 14, 2021). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3766272

Ole-Kristian Hope (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

HOME PAGE: http://www.rotman.utoronto.ca/FacultyAndResearch/Faculty/FacultyBios/Hope.aspx

Zhongwei Huang

Fudan University - School of Management ( email )

No. 670 Guoshun Road
Shanghai, 200433
China

HOME PAGE: http://huang-zw.github.io

Rucsandra Moldovan

John Molson School of Business, Concordia University ( email )

Montreal, Quebec H3G 1M8
Canada
+1-514-848-2424 ext 2528 (Phone)

HOME PAGE: http://https://sites.google.com/site/rucsandramoldovan

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