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Investor Relations' Quality and Mispricing

Houdou Basse Mama and Rachidi Kotchoni

No 2017-33, EconomiX Working Papers from University of Paris West - Nanterre la Defense, EconomiX

Abstract: We investigate the role of corporate investor relations (IR) in the correction process of mispricing. We provide robust evidence of accruals' mispricing for the sub-sample of firms with lower-rated IR. However, mispricing is more pronounced among firms with higher valuation uncertainty. Further analyses show that firms with higher-rated IR on average earn higher returns, and this relation is resilient to known risk/mispricing factors. More important, IR likely has countervailing effects on mispricing. IR may widen the information asymmetry among investors and concomitantly reduce future analyst forecast errors. Overall, high-quality IR appears to facilitate the market's ability to establish efficient stock prices.

Keywords: Investor relations; Mispricing; Mishkin test; Information asymmetry; Information uncertainty. (search for similar items in EconPapers)
JEL-codes: G12 G14 D82 (search for similar items in EconPapers)
Date: 2017
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