The Supply and Effectiveness of Investor Relations in Insider- vs. Outsider-Oriented Markets

Dmitry Bazhutov (), André Betzer (), Francois Brochet (), Markus Doumet () and Peter Limbach ()
Additional contact information
Dmitry Bazhutov: Finance and Corporate Governance Department, Schumpeter School of Business Economics, University of Wuppertal, 42119 Wuppertal, Germany
André Betzer: Finance and Corporate Governance Department, Schumpeter School of Business Economics, University of Wuppertal, 42119 Wuppertal, Germany
Francois Brochet: Accounting Department, Questrom School of Business, Boston University, Boston, Massachusetts 02215
Markus Doumet: Finance and Corporate Governance Department, Schumpeter School of Business Economics, University of Wuppertal, 42119 Wuppertal, Germany
Peter Limbach: Faculty of Business Administration and Economics, Corporate Finance and Governance Department, University of Bielefeld, 33615 Bielefeld, Germany

Management Science, 2023, vol. 69, issue 1, 660-683

Abstract: Using annual survey-based investor relations (IR) data for a panel of European companies, we document that the supply and effectiveness of IR varies with country- and firm-level demand. Relative to their industry peers, firms from insider-oriented countries have larger IR staff, which predicts better IR rankings. Better IR is associated with greater visibility, information assimilation, and valuation, with visibility and assimilation being significantly greater for firms from insider-oriented countries. Within such countries, firms with greater outsider orientation have higher capital market benefits. Furthermore, using Markets in Financial Instruments Directive II as a shock to analyst coverage, we find an incrementally larger association between IR and visibility in insider-oriented countries after 2017. Overall, the evidence suggests that the supply of IR in insider-oriented markets has reached a high level, acting as a viable mechanism to improve firms’ information environment. However, within those countries, IR demand still varies significantly, with outsider-oriented firms showing greater IR effectiveness.

Keywords: investor relations; transparency; ownership concentration; firm visibility; information asymmetry; cost of capital (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.2022.4368 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:69:y:2023:i:1:p:660-683

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().