DO INVESTOR RELATIONS MAKE A DIFFERENCE

We investigate the relationship between the quality of corporate investor relations activities and two measures of common stock information risk - the dispersion and the accuracy of security analyst earnings per share (EPS) forecasts. It appears that there is a significant inverse relationship between investor relations quality, as measured by the annual ratings of the Financial Analysts Federation Corporate Information Committee, and the dispersion of security analyst EPS forecasts. Security analysts have less dispersed (more consistent) EPS forecasts for corporations with higher-rated investor relations programs than for corporations with lower-rated programs. However, there does not seem to be any significant relationship between the quality of corporate investor relations programs and the accuracy of security analyst EPS forecasts.