Investor Relations and Firm Disclosures: Evidence from Quarterly Earnings Conference Calls

Abstract

This paper examines the effect of investor relations (IR) on a firm’s quarterly earnings conference call. IR is defined as a “strategic management responsibility” in charge of establishing a two-way communication between the firm and the financial community. I posit that IR has a dual role in the firm. On one hand, IR acts as an information bridge between management and the financial market, establishing the flow of two-way communication. On the other, IR acts as the voice of the company, managing the firm narrative and controlling the dialogue with external stakeholders. My findings suggest that this duality is reflected in the conference call. Results suggest that while IR encourages greater discussion of manager outlook and commentary, IR also serves to restrict manager responses in the Q&A to what was previously disclosed in the presentation and to inject positive spin in the conference call. Further, results suggest that a mechanism through which IR seeks to control the dialogue is the discrimination of analyst order in the Q&A. Results also offer some evidence that IR increases conference call informativeness through their effect on conference call content. Overall, I find that IR exhibits evidence of their dual role on the conference call disclosure.