Читать книгу A Review of IR Practices in Bahrain - Mohamed Sr. Isa - Страница 5

According to the National Investor Relations Institute (2004) in USA:

“Investor relations is defined as a strategic management responsibility that integrates finance, communication, marketing and securities law compliance to enable the most effective two-way communication between a company and the financial community and other constituencies, which ultimately contributes to a company’s securities achieving fair valuation.

The process of marketing a company’s stock involves identification of the target audiences who might have an interest in investing in or analyzing the company’s securities and presenting historical and prospective information about the company to enable them to make an informed investment decision or recommendation. Marketing in this context does not mean “selling” a company’s securities to investors, but rather a process of identifying target audiences and educating them about the present and potential value of those securities so they can make educated investment decisions.”

IR is considered a new phenomenon that developed most rapidly in USA and then followed by the United Kingdom (Marston and Straker, 2001). It emerged in USA in the 1960’s (Silver, 2004). One of the most important driving forces that developed IR in USA was the Institutionalization of its Capital Markets. In 1996, Pension Funds, Mutual Funds and Insurance Companies had the largest asset holdings in listed companies’ securities. Due to their legal fiduciary responsibilities to their clients and their power; they insisted on having detailed and timely strategic information disclosure from listed companies (Higgins, 2000). Accordingly, companies had to match their IR capabilities and activities to the increased information requirements.

The author developed a simplified model to explain the dynamics of the Fiduciary Responsibility of Institutional Investors towards Small Investors, see Figure 1.1.

Figure 1.1: The Fiduciary Responsibility of Institutional Investors

In basic terms, retail investors or subscribers invest their money with institutional investors so as the latter manage their money with the aim of maximizing the wealth of small investors. Since Institutional Investors have the required human resources from research analysts to fund managers, and since they have larger pools of funds to invest, they are in a position to force listed companies to disclose more information to them as part of their investment due diligence process to avoid questioning and lawsuits from small investors if investments losses are incurred. A bad example of fiduciary responsibility would be without question is Bernard Madoff who received a 150 years jail sentence for making thousands of his clients lose billions of Dollars using a fraudulent investment scheme (Reuters, 2009).