The Effect of Investor Relations on Income Objectives and MeetingExpectations 公开
Kirk, Marcus (2009)
Abstract
Abstract
The Effect of Investor Relations on Income Objectives and Meeting Expectations By: Marcus Kirk Over a quarter of publicly listed firms employ National Investor Relations Institute (NIRI) members. Yet we know little about the impact of investor relations (IR) for these firms. I examine the role of professional IR in achieving income objectives and influencing managers' financial reporting decisions to meet those objectives. I find companies with NIRI members as employees (IR firms) are more likely to meet analyst forecasts and have smoother earnings. I also find that IR firms rely less on accrual or earnings management to meet analyst forecasts and more on expectations management. Finally, I document that IR firms receive a greater market premium than non-IR firms for meeting analyst expectations. The evidence suggests that while IR may increase the pressure to meet expectations, it also relieves the pressure on firms to use earnings management to meet these expectations.
Table of Contents
TABLE OF CONTENTS CONTENT PAGE
I. DISSERTATION
a.Introduction 1
b.The Role of Investor Relations 5
c.Theory and Hypotheses 8
d.Sample and Research Design 11
i.Sample 11
ii.Estimation Method 13
iii.Outcome Variables 15
e.Empirical Results 18
i.Propensity Score Matching 18
ii.IR, Analyst Following, Institutional Ownership and Stock Market Characteristics 22
iii.Income Objectives 23
iv.Earnings Management to Meet Analyst Expectations 24
v.Expectations Management 27
vi.Stock Market Reaction to Meeting/Missing Analyst Expectations 31
vii.Earnings Management to Avoid Losses 33
f.Additional Analyses 35
i.Survivorship 35
ii.The Effect of Matching on Additional Variables of Interest 37
iii.The Effect of IR Incremental to the Change in Disclosure 38
iv.Matching With / Without Replacement 39
g.Conclusion 41
h.References 44
II. FIGURES
a.Figure 1: Propensity Score Density for IR and Non-IR Firms 49
b.Figure 2: Control Variable Distributions between IR and Matched Non-IR firms 50
c.Figure 3: Survivorship Rates of IR and Non-IR Firms 52
III. TABLES
a.Table 1: Sample Selection 53
b.Table 2: Descriptive Statistics and Logit Propensity Score Regression 54
c.Table 3: IR and Non-IR Firm Descriptive Statistics Before and After Matching 56
d.Table 4: Analyst Following, Institutional Ownership, and Stock Market Characteristics 58
e.Table 5: Differences in Income Objectives 59
f.Table 6: Earnings Management to Meet Analyst Expectations 60
g.Table 7: Expectations Management to Meet Analyst Expectations 61
h.Table 8: Stock Market Reaction to Meeting/Missing Analyst Expectations 63
i.Table 9: Earnings Management to Avoid Losses 65
j.Table 10: Exploratory Survivorship Analysis 67
k.Table 11: Other IR and Non-IR Firm Descriptive Statistics Before and After Matching 70
l.Table 12: The Effect of IR Incremental to the Change in Disclosure 71
m.Table 13: Matching Without Replacement 74
IV. APPENDICES
a.Appendix A: Propensity Score Matching 80
b.Appendix B: Variable Definitions 84
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