Does Corporate Investor Relations Affect Stock Prices?
- Topics:
- Investor Relations
- Tags:
- Finance,
- Investment,
- Investor Relations,
- IR,
- Stock,
- Stock Price,
- Survey,
- Valuation
- Source:
- claymahaffey.com
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Overview: "Everyone believes, or hopes, that IR affects stock prices, but how does one really know if it does or not? The conclusion is that the highest valued companies do appear to follow a strategic marketing model of IR practices. The practices of the highest- and lowest valued companies are different as well. A regression model was developed that predicted valuation as a function of only two survey responses (measures of transparency and investor congruence) with 99% confidence that the correlation is not due to chance. What does it mean? First it is surprising that “subjective” IR actions per se can be quantified and successfully used to predict longterm valuations. The model should represent causation, not just correlation, since the predictive variables are selected from the actual survey responses. For IR practitioners and management desiring to increase their valuation, it may be an opportunity to reevaluate their practices and quantify the incentives to consider alternative strategies. For investors, it may be a new tool to evaluate the current market multiples versus actual IR practices and identify potential investment opportunities. Since the long-term valuations of the first valuation quartile were twice those of the fourth quartile, there seems to be substantial incentive to explore this more closely."
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Format: PDF | Size: 545KB | Date: Jan 2002 | Pages: 11
