Studying On Investor Relations Management And Firm Value

Since1990s, the global capital market gradually becomes standard, market-oriented and institutionalized; the leading role of buyer’s market becomes more and more obvious, and how to meet investors’information demand and protect investors’profits has become the key to maintain capital market under benign development. However, based on traditional information disclosure rules, it is hard to completely meet investors’ diversified information requirements; therefore, the information asymmetry of different degree inevitably happens in capital market, even including some shocking false information disclosure of listed companies, such as Enron, WorldCom and Guangxia (Yinchuan), as well as secrete behaviors such as realizing the purpose of "tunneling" via connected transaction and performance manipulation. Those series of information asymmetry problems cause great damage on middle and small shareholders’benefits, trigger investors’crisis of confidence on listed companies, and seriously disturb normal operation order of capital market. How to overcome crisis of confidence, protect investors’benefits, and reshape investors’confidence become the problem which shall be urgently solved in constructing harmonious and orderly capital market; therefore, the investor relations management (short for IBM) theory emerges at the right moment.Appearing in American capital market in1950s, IRM is a kind of corporate behavior beyond traditional information disclosure; its content not only includes information communication between listed company and investor, but also include information delivery activities between intermediary organs involved in communication process. As the western capital market gradually becomes mature, the management means, operation standard, and evaluation index of IRM has been relatively perfect and established its own system; the content and ways are continuously enriched; through strategic communication and interaction, IRM can meet investors’diversified and individual information requirement in terms of information capacity and quality, so as to improve corporate reputation, reduce capital cost and finally improve corporate value.As for China which has a relative lagging capital market process, IRM also has a relatively lagging development process in China. Since the21st century, Chinese regulatory authority starts to introduce IRM concept for the hope of enhancing the information communication between listed companies and external environment via IBM, so as to guarantee investors’interests and mitigate information asymmetry in capital market. In order to standardize and guide the development of IRM in China, Shenzhen Stock Exchange and Shanghai Stock Exchange issued Guide of Shenzhen Stock Exchange on Investor Relations Management and Self-discipline Pact of Investor Relations Management in2003and2004respectively; since then, IRM of Chinese listed companies has system basis for development both in scope and depth. Under this system background, IRM is used as the communication strategy of listed companies and gradually attracts more and more attention.Through dozens of years of exploration, although Chinese IRM has made certain achievements in theory and practice field, it can’t be denied that there is great gap between Chinese IRM level and IRM level of developed capital market, thus there is still a long way to form theoretical system and actual standard which conforms to objective requirements of Chinese capital market. Currently, a relatively convergent conclusion has been made in the research on factors influencing IRM level. It is thought that the interactive relationship with stakeholders can be established through two-way communication; IRM can improve corporate reputation, reduce capital cost, and improve corporate performance. However, the research on IRM mechanism is not perfect. Therefore, the overall and multilevel theoretical research on IRM is an urgent requirement proposed by capital market to academic circle.Based on this, this paper aims at making an empirical analysis on the function of IRM in improving corporate performance through taking the visibility of listed companies in capital market as entry point on the basis of classification on current research. Through observing the listed companies which have carried out IRM strategy, this paper attempts to solve the actual problems of action mechanism and strategic effect through confirming the intermediate function of visibility for the purpose of enriching IRM research conclusion. This paper hopes to provide reference for supervision organizations to make policies and provide enlightenments for listed companies to carry out investor relations activities, so as to realize joint improvement of corporate value and overall value of capital market.This paper firstly sorts out IRM and related theory, and then establishes IR index evaluation system based on3dimensions (voluntary information, intermediary information and interactive information) to carry out evaluation on359listed companies, and makes use of STATA12.0to make empirical analysis on whether IRM can improve corporate value and improve the visibility of companies in capital market, and further explores the influence of IRM on inner mechanism of corporate value from perspective of visibility. The research thinks that the listed companies with high IRM level own more quantity of analysts followed, higher degree of media attention, and higher proportion of institutional investor shareholding; meanwhile, the higher visibility of capital market reduces the information cost of investors’decision making, delivers the good information about internal personnel with due diligence, reduces the risk premium rate required by investors, and brings low capital cost, thus improving the corporate market value. That is to say, the mediating effect of IRM via visibility effectively improves corporate value; through interactive communication, the listed companies can obviously improve the degree of attention from analysts, media and institution shareholders, and make themselves become companies well known to wide investors, which can effectively improve corporate value.This paper is divided into6parts. The1st part is introduction, which introduces the background, research purpose, research significance, research thought, research method and innovation point of this paper in succession. The2nd part is theoretical basis and institutional background of this paper; the theoretical basis includes origin and development of investor relations theory, visibility of capital market, and relevant theories, and then the institutional background of Chinese IRM is introduced, including institutional basis, development history and features. The3rd part is literature review, which sorts out domestic and foreign scholars’research result about IRM, carries out summary, sorting-out, and brief review on IRM effect and influence factors, and also sorts out the research result about relationship between IRM and visibility of capital market, and relationship between IRM and corporate value. The4th part is research hypothesis and research design. In this part, firstly, the research hypothesis is proposed, and a description is made on data source, explained variable, explaining variable, and control variable, and then the relation model and empirical model of this paper are designed on the basis of relevant empirical research. The5th part is empirical result and analysis. This part is the main content of this paper. In this part, STATA12.0is utilized to carry out regression on sample data to confirm the hypothesis, and then two methods (replacement of explained variable and grouping regression) are utilized to confirm the robustness of conclusion. The6th part is conclusion and suggestions; it proposes conclusion of this paper based on empirical result, proposes corresponding policy suggestions from4levels, that is, institutional construction, institutional setup, listed companies, and intermediary organs, and finally proposes perfection method and research prospect as for deficiencies emerging in the research.The research of this paper mainly focuses on exploring inner action mechanism of IRM. The innovation points are mainly reflected on following aspects:(1) This paper selects the listed companies which join "investor relations interactive platform" as sample companies to measure visibility in capital market in2006-2012, so as to ensure that the listed companies within scope of data research have joint institutional background and same measurement standard; both train of thought and data are novel.(2) In terms of construction of index system, because China has no authoritative investor relations association, no generally-accepted evaluation standard is formed yet, and the foreign evaluation method can’t be copied; therefore, through sorting out and making comparison on domestic and foreign scholars’evaluation methods on IRM index as well as combining with actual situation of Chinese capital market, this paper establishes the investor relations management index (IR).(3) Most of domestic scholars’ previous researches focus on factors influencing IRM or implementation effect of IRM, but no deep and generally-accepted result is obtained in terms of action mechanism. This paper attempts to confirm the mediate function of corporate visibility on IRM and corporate value.Through a series of researches, the main conclusions of this paper are obtained as below:The company improves IR level through continuous information disclosure and interactive communication, which can attract securities analysts’ wide attention, improve the exposure degree in financial press, receive institutional shareholders’favor and make itself become a company familiar to the market, thus attracting wide investors and obtaining reliable capital.IR level has obvious negative correlation with book-to-market ratio, which shows that the companies with good IRM can realize a larger improvement in market value compared to that in book value, and the market value has more obvious benefits in value improvement.In order to confirm the mediate function of visibility, this paper adopts methods of Freedman(1992) and Mackinnon(2002) to check whether the improvement of corporate value can be explained from the perspective of visibility. The empirical result shows that the corporate visibility plays a significant mediate function in IRM, and it can actually realize the purpose of improving corporate value through affecting visibility. In IRM implementation process, the attention shall be paid to improving the corporate visibility in capital market.At the ending of this paper, related suggestions are proposed from macro institutional construction, institutional setup, micro companies, and intermediary agent to ensure implementation effect of IRM activities of Chinese listed companies, so as to establish corporate image, improve corporate value, standardize investor protection, maintain the order of capital market, improve efficiency of resource allocation, and finally promote Chinese capital market to realize a healthy and orderly development.