The term Investor Relations refers to the set of communication activities that can influence the performance of a security and the assessment that stakeholders make of a company.
The IR activities (acronym used for Investor Relations) are usually carried out by an external firm or by a company’s internal department and have the function of providing information on its financial performance and main operations. The figure who is in charge of this task is known as Investor Relator.
The IR is therefore the link between a company and all stakeholders, such as: shareholders, financial analysts, rating agencies, investment companies and banks.
What is Financial Communication?
It is a collection of statements issued by the enterprise’s management through any communication channel to various interested subjects on the trends in profitability, finance, assets and is divided into two macro-categories:
Compulsory Information consists of the disclosures required by law, such as: financial statements, press releases, reports of shareholders’ meetings and prospectuses.
Voluntary information, on the other hand, involves all other activities that are not called for in legislation but are considered essential by the market: meetings with the financial community (road shows), conference calls, presentations, website, direct contacts and social media.
What are the Investor Relator’s main responsibilities?
Proper IR work involves timely notification of any news that may affect the market’s assessment of the company, outlining the strategic intent behind a particular management action, its financial details and its short- and long-term economic impact.
Among the various tasks of the Investor Relator are the preparation of reports and analyses for internal top management purposes and feedback and critical issues coming from the market.
The Investor Relator must also avoid stock market misconduct, i.e., leveraging insider’s information or spreading false data in order to alter securities’ price.
Why is it important for a company to properly perform these duties?
As seen above, the law enforces a series of mandatory reports by the company, while the market demands much more, requiring transparency, promptness, and the plain description the reasons behind corporate decisions. This is why the role of the Investor Relator is relevant for the performance of an enterprise and its securities.
The Financial Market is an essential instrument for the growth of companies. It allows them to fund development projects, enhance the value of products and brands, speed up internalization and ultimately avail themselves of tax advantages for listed companies.
In the listing process and throughout the lifecycle of a listed enterprise, Investor Relations is crucial to ensuring transparency in communication with investors, becoming itself a marketing tool.