Investor relations and information asymmetry

Abstract

Companies invest significant volumes of resources in investor relations (IR) departments. The professionals working in the IR department are responsible for communication between the company and the market, so that the information generated is widely disseminated and understood by investors. In this context, this research aims to investigate whether there is evidence that the IR activity decreases information asymmetry between the company and the market. Specifically, we evaluate the hypothesis that Brazilian companies with IR websites classified as more informative have a reduced bid-ask spread (proxy for asymmetry). Therefore, this paper classifies the informative content from IR websites of Brazilian companies for the years 2013 and 2014 and relates the outcomes obtained with information asymmetry metrics. Initially, the estimation considers the pooled ordinary least squares (POLS) model and, at a second moment, in order to mitigate potential endogeneity problems, the pooled two-stage least squares (2SLS) model is used. The results indicate that more informative IR websites are able to decrease the bid-ask spread of Brazilian listed companies. This finding strongly encourages companies to provide information to stakeholders on well-structured IR websites of their own.

Analisis Informasi Ekonomi Dan Penggunaan Teknologi Informasi Pada Industri Kreatif Di Jawa, Bali Dan Nusra

“…Laporan keuangan dalam kegiatan usaha dan bisnis juga digunakan oleh bank dan investor untuk memberikan pinjaman untuk modal usaha, dan sebagai acuan bagi investor untuk menginvestasikan uang atau modalnya di sebuah usaha atau bisnis. Aktifitas publikasi informasi dari petugas investor relations (IR) dapat menurunkan masalah adverse selection yang berasal dari informasi yang tidak sempurna antara penjual dan pembeli di dalam pasar saham (Rodrigues and Galdi, 2017). Ini menunjukkan bahwa informasi keuangan menjadi sangat penting untuk menentukan keputusan.…”

CSR, Sustainable Value Creation and Shareholder Relations

“…Regular and ongoing dialogue with shareholders is critical for developing and maintaining effective investor relations, understanding the views of shareholders and helping them understand the view of the board (Business Roundtable, 2016): high sustainability companies are significantly more likely to attract dedicated rather than transient investors (Eccles et al, 2014). For this reason, the investor relations (IR) function assumes a critical role (Rodrigues & Galdi, 2017). IR activities decrease the risk associated with information asymmetry and market abuse (Agarwal et al, 2015), improve the company's visibility and reputation so that the company's shareholder base is widened (Bushee & Miller, 2012), and increase accuracy in analysts' forecast, reducing the cost of capital and increasing share price (Brennan & Tamarowsky, 2000).…”

Corporate Social Responsibility and Shareholder Relations

“…For this reason, the investor relations (IR) function assumes a critical role [15]. IR activities decrease the risk associated with the information asymmetry and market abuse [16], improve company's visibility and reputation so that the company's shareholder base is widened [17], and increase accuracy in analysts' forecast reducing the cost of capital and increasing share price [18].…”