The effect of investor relations on financial performance.

Abstract

In the recent years, there has been an increasing interest in the role that Investor Relations (IR) plays. This study analyzes if IR makes a difference to the financial performance of a firm. We compare top IR firms and their financial performances relative to non-IR firms based on their Return on Assets (ROA), Return on Equity (ROE) and Annualized Stock Returns. T-test was used to test for differences in performance between the two groups. Regression analysis was then run to test the hypotheses that link the data gathered from the Institutional Investor Research Group database to factors thought to influence respective firms’ financial performances. Our results confirm a significant positive relationship between IR and ROA for both the current and following year. However, the positive relationship between IR and annualized stock returns only exists for the current year. No statistically significant relationship was found between IR and ROE.