Good IR matters: Here’s why

May 11, 2018
Quality of IR influences investment decision or coverage notes, say 93 percent of investors and analysts

Almost nine out of 10 members of the investor community will assign a sizeable premium to the share price of companies with a well-run IR program – and an even bigger discount to those with a substandard one, according to IR Magazine’s first report on The value of IR.

Indefatigable IROs will no doubt rejoice upon learning that their hard work does not go unnoticed.

On average, 31 percent of respondents to the survey, which polled fund managers as well as sell-side and buy-side analysts globally, say they added a 5 to 10 percent premium to their valuation of a company with good IR.

Interestingly, for 6 percent of respondents, the bonus given will reach 20 percent or more while for 11 percent the discount will top 20 percent.

Sell-side analysts are the most sensitive to sound IR practices, with 40 percent adding a 10 to 15 percent premium or more, compared to 32 percent of buy-side analysts and 34 percent of fund managers. The sell side is also more inclined to apply the steepest discounts for less credible IR – with 13 percent doing so compared to 10 percent of fund managers and 7 percent of buy-side analysts.

Regionally, it was found that Asia-based respondents assigned both a bigger premium or discount to share prices depending on the perceived quality of IR: 58 percent of the latter added 10 to 15 percent or more, compared with 26 percent in EMEA and 24 percent in the Americas. Asia-based respondents are also more likely to make a subtraction too, with 66 percent saying they subtracted 10 to 15 percent or more, compared with 39 percent in EMEA and 31 percent in the Americas.

Findings also reveal that both the premium and discount given increase according to market cap size. Seventy-four percent of fund managers and analysts covering or investing in large caps will add 5 to 10 percent or more to the share price, compared with 65 percent for mid-caps and 57 percent for small caps.

A final piece of good news for IROs is the fact that for 48 percent of respondents, the arrival of an IRO with a good reputation or background at a new company would increase their interest as a potential investment or coverage opportunity.

Download The Value of IR report here

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