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Investor Relations' Quality and Mispricing

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  • Houdou Basse Mama
  • Rachidi Kotchoni

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Abstract

We investigate the role of corporate investor relations (IR) in the correction process of mispricing. We provide robust evidence of accruals' mispricing for the sub-sample of firms with lower-rated IR. However, mispricing is more pronounced among firms with higher valuation uncertainty. Further analyses show that firms with higher-rated IR on average earn higher returns, and this relation is resilient to known risk/mispricing factors. More important, IR likely has countervailing effects on mispricing. IR may widen the information asymmetry among investors and concomitantly reduce future analyst forecast errors. Overall, high-quality IR appears to facilitate the market's ability to establish efficient stock prices.

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  • Houdou Basse Mama & Rachidi Kotchoni, 2017. "Investor Relations' Quality and Mispricing," Working Papers hal-04141636, HAL.
    • Handle: RePEc:hal:wpaper:hal-04141636
    Note: View the original document on HAL open archive server: https://hal.science/hal-04141636
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