To a large degree, investor relations exists in an academic research vacuum. It is hard to find good data on many of the issues IR practitioners spend their time on: guidance versus no guidance, how much information should be disclosed, how to be effective on conference calls, and the overall effectiveness of investor relations programs. Further, if you do go looking for the data, as I have done for my class at Rice, it’s buried in obscure academic journals and couched in dense academic verbiage. (If you are looking for a summary of some of the findings, you can find them on my July 7, 2008 and March 13, 2008 posts.) As a result, much of what investor relations people do is based upon common industry practices, hard learned experience and word of mouth, filtered through the particular corporate environment in which they operate. Hard data on whether or not these practices are effective is simply hard to find and so people go with their gut reaction and what they are comfortable with.
To a certain extent I think this is because effective investor relations covers a number of different disciplines, including finance, communication, marketing and law. Add to that effectiveness mix the need to be an expert on your company’s operations and industry and a comprehensive understanding of how the capital markets work, and you can start to understand why getting good comparisons on the difference between successful IR programs and run of the mill efforts is so difficult.
Recently however, I have run across a book that pulls together the research in the area of disclosure and investor relations activities and puts it into clear understandable language. (I’ve actually been reading the book for a while now, but I’m having trouble getting through it because I keep stopping to make notes to use in my investor relations class.) That book is “Winning Investors Over” by Baruch Lev, a professor at the Stern School of Business at NYU. It covers most of the issues that bedevil IR practitioners, discusses what the research data shows, and makes recommendations on courses of action. For example: Not sure what to do about guidance? Not only does this book show you what the research says, it also helps you put the decision process into a framework that helps you work through the issue. And he does this with issue after issue.
If you are an investor relations practitioner and you want your company’s investor relations and disclosure practices to be informed by the data, not just what everyone else does, you need to read this book. It is so far beyond what I have seen in other books about investor relations as to be in a class by itself.