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Investor Relations' Quality and Mispricing

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  • Houdou Basse Mama
  • Rachidi Kotchoni

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.

Suggested Citation

  • Houdou Basse Mama & Rachidi Kotchoni, 2017. "Investor Relations' Quality and Mispricing," EconomiX Working Papers 2017-33, University of Paris Nanterre, EconomiX.
    • Handle: RePEc:drm:wpaper:2017-33
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    More about this item

    Keywords

    Investor relations; Mispricing; Mishkin test; Information asymmetry; Information uncertainty.;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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