Karolyi & Liao: The Economic Consequences of Investor Relations – A Global Perspective


We offer new evidence on the economic value of investor relations (IR) activity using the results of a 2012 global survey of IR officers and their activities at over 800 firms from 59 countries. More active IR programs, as measured by firm’s involvement in broker-sponsored conferences, in facilitating one-on-one meetings with institutional investors, through global outreach, and with formal disclosure, media and governance policies, are associated with a statistically significant and economically large 8 – 12% higher Tobin’s q valuation. The findings are resilient to concerns about potential reverse-causality as we instrument the level of IR activity with firm-level constraints on IR personnel, salaries, and budget. Greater IR activity does not substitute for firm-level governance actions and is not associated with higher stock liquidity.

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