TY - JOUR
T1 - Investor relations and investment efficiency
AU - Godsell, David
AU - Jung, Boochun
AU - Mescall, Devan
N1 - We acknowledge helpful comments from Alex Edwards (editor), two anonymous reviewers, Jia Kai Chen, Alper Darendeli (discussant), Joonho Kim, Xiumin Martin, Jeff Ng (discussant), Jalal Sani, Oktay Urcan, Stefan Zeume, and Xiaofei Zhao (discussant); workshop participants at the University of Calgary, the University of Hawaii–Manoa; and conference participants at the 2019 Hawaii Accounting Research Conference, the 2019 CAAA Conference, and the 2019 AAA Conference. We are grateful to BNY Mellon and their Global IR Advisory team for providing survey data. Jung acknowledges financial support from the Shidler College of Business.
PY - 2023/9/1
Y1 - 2023/9/1
N2 - A rich literature suggests that investor relations officers (IROs) fulfill a one-way information intermediary role by transmitting firm information to investors. We advance this literature with empirical evidence suggesting IROs are two-way information intermediaries who also return investment efficiency-increasing investor feedback to firm insiders. Exploiting granular investor relations activity data for 1,375 global firms, we document that firm investment efficiency is higher when IROs spend more time with existing institutional investors, conduct more institutional investor outreach, and meet more often with investment professionals (market intelligence collection), and when IROs transmit investment community feedback to board directors (market intelligence circulation). We mitigate endogeneity concerns stemming from our association tests by employing an expansive suite of control variables, a high-dimensional fixed-effects structure, an entropy-balanced estimation sample, and an instrumental variables analysis. Our evidence supports theory predicting that managers learn about investment opportunities and their costs and benefits from investors and informs a literature predominantly characterizing IROs as one-way information intermediaries.
AB - A rich literature suggests that investor relations officers (IROs) fulfill a one-way information intermediary role by transmitting firm information to investors. We advance this literature with empirical evidence suggesting IROs are two-way information intermediaries who also return investment efficiency-increasing investor feedback to firm insiders. Exploiting granular investor relations activity data for 1,375 global firms, we document that firm investment efficiency is higher when IROs spend more time with existing institutional investors, conduct more institutional investor outreach, and meet more often with investment professionals (market intelligence collection), and when IROs transmit investment community feedback to board directors (market intelligence circulation). We mitigate endogeneity concerns stemming from our association tests by employing an expansive suite of control variables, a high-dimensional fixed-effects structure, an entropy-balanced estimation sample, and an instrumental variables analysis. Our evidence supports theory predicting that managers learn about investment opportunities and their costs and benefits from investors and informs a literature predominantly characterizing IROs as one-way information intermediaries.
KW - investment community feedback
KW - investment efficiency
KW - investor relations
UR - http://www.scopus.com/inward/record.url?scp=85163018727&partnerID=8YFLogxK
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U2 - 10.1111/1911-3846.12860
DO - 10.1111/1911-3846.12860
M3 - Article
AN - SCOPUS:85163018727
SN - 0823-9150
VL - 40
SP - 1966
EP - 1998
JO - Contemporary Accounting Research
JF - Contemporary Accounting Research
IS - 3
ER -