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Investor relations, information asymmetry and market value
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Agarwal, Vineet, Taffler, Richard J., Bellotti, Xijuan and Nash, Elly A. (2016) Investor relations, information asymmetry and market value. Accounting and Business Research, 46 (1). pp. 31-50. doi:10.1080/00014788.2015.1025254 ISSN 0001-4788.
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Official URL: http://doi.org/10.1080/00014788.2015.1025254
Abstract
Evidence to date on the market value of investor relations (IR) strategies is limited. We test the market relevance of IR activity directly employing a proprietary database measuring IR quality across all firms listed on NYSE, Amex and NASDAQ. Although, in theory, ‘repackaging’ and communicating existing information should have no market impact, we find that firms with higher quality IR strategies are rewarded with significantly higher valuation multiples. In addition, increase in IR quality is associated with increases in analyst following and liquidity. Overall, our findings are generally stronger for small firms which are more likely to be ‘neglected’. Our evidence is consistent with effective IR successfully raising firm visibility leading to enhanced recognition and reduced information asymmetry in line with Merton (1987) and thus ‘fairer’ firm valuation as argued by IR professionals.
Item Type: | Journal Article | ||||||
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Divisions: | Faculty of Social Sciences > Warwick Business School | ||||||
Journal or Publication Title: | Accounting and Business Research | ||||||
Publisher: | Routledge | ||||||
ISSN: | 0001-4788 | ||||||
Official Date: | 2016 | ||||||
Dates: |
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Volume: | 46 | ||||||
Number: | 1 | ||||||
Page Range: | pp. 31-50 | ||||||
DOI: | 10.1080/00014788.2015.1025254 | ||||||
Status: | Peer Reviewed | ||||||
Publication Status: | Published | ||||||
Access rights to Published version: | Restricted or Subscription Access |
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