Company Communications With Analysts and Fund Managers: A Study of the Investor Relations Activities of Large UK Quoted Companies

Marston, Claire Lesley (1993) Company Communications With Analysts and Fund Managers: A Study of the Investor Relations Activities of Large UK Quoted Companies. PhD thesis, University of Glasgow.

Abstract

This thesis investigates the area of company investor relations with particular emphasis on informal communications between company officials and analysts or fund managers. These communications take the form of meetings of various types, telephone conversations, feedback on analysts' research reports and mailing of information. The major, overall, question that encapsulates this project seeks to establish the causes, nature and effect of company communications with analysts. Given the extensive financial reporting requirements in the UK and the information disclosure facilities provided by the London Stock Exchange, what causes companies to provide further communication opportunities to analysts? The overall research problem can be restated in terms of four general research questions: How much does it cost companies, both in terms of money and organisational effort, to maintain a programme of communications with analysts? What methods of communication are used by individual companies in getting their message across? What information is communicated by companies to analysts? What are the opinions of companies regarding the costs and benefits of communicating with analysts? An investigation is made of the legal and regulatory framework governing company communications with analysts and fund managers. A review is made of the relevant literature on the role of financial analysts, investor relations as a management discipline, and financial public relations consultancy. Having established the setting within which investor relations occurs, previous empirical and other evidence from the accounting and finance literature is reviewed for information on company communications with analysts. This study views investor relations as a form of voluntary information disclosure akin to voluntary disclosure in financial reports. As such, several hypotheses are proposed that seek to explain investor relations activity in terms of a selection of company specific dependent variables. This approach follows on from the work of several other researchers who have tested for an association between variables such as company size and level of information disclosure in accounts. Nine hypotheses are put forward and justified with reference to previous empirical research. The first one is that there may be an association between company size and cost incurred, both in terms of money and organisational effort, in communications with analysts. The second is that there may be an association between the marketability of shares and the cost of company communications with analysts. Number three is that there may be an association between stock market risk measures and the cost of analyst communications. The fourth hypothesis is that the cost of analyst communications may be associated with profitability. The fifth is that gearing may be associated with the cost of analyst communications. Hypothesis number six proposes that recent takeover activity may be associated with the cost of analyst communications. Hypotheses seven and eight are that the level of insider shareholdings and substantial shareholdings may be associated with the cost of the analyst communications programme. Hypothesis nine proposes that the industrial classification of the company may be associated with the cost of analyst communications. In formulating these hypotheses, cost is used in its broadest terms, indicating not only cash expended but also staff time and organisational effort generally. The choice of methodology, a postal questionnaire, is then discussed and the execution of the survey is described. The results of the survey are then set out. This consists of detailed descriptive statistics obtained from an analysis of the questionnaire responses. Many aspects of company communications with analysts and fund managers are covered. The null versions of the hypotheses are tested using certain answers from the questionnaire data set as dependent variables. Univariate analysis and multivariate analysis is employed. The results can be summarised in two sections. Firstly, the descriptive statistics which provide an insight into how investor relations are carried out and secondly the results of the hypothesis testing. It was found that company chief executives and finance directors were usually involved in the investor relations effort. The majority of companies held meetings for and talked on the telephone with, analysts and fund managers. The majority also commented on analysts' research reports and mailed information to analysts and fund managers. The organisational arrangements for carrying out the investor relations process were found to vary widely as did the costs incurred and the number of meetings held. In general the opinions of the respondent companies indicated that investor relations with analysts and fund managers is viewed as a valuable means of communication and that companies were satisfied with their relationship with the City.

• Item Type: Thesis (PhD)
• Qualification Level: Doctoral
• Additional Information: Adviser: S J Gray
• Keywords: Management, Finance
• Date of Award: 1993
• Depositing User: Enlighten Team
• Unique ID: glathesis:1993-75717
• Copyright: Copyright of this thesis is held by the author.
• Date Deposited: 19 Nov 2019 18:31
• Last Modified: 19 Nov 2019 18:31
• URI: https://theses.gla.ac.uk/id/eprint/75717