Читать книгу A Review of IR Practices in Bahrain - Mohamed Sr. Isa - Страница 6

IR is an important corporate function (Higgins, 2000) and is an important part of corporate governance (Abdul Hamid, 2005); in fact Dolphin (2004) views it as a strategic tool because companies appreciate the need to be understood by their capital providers. According to one study, 85% of UK-Based companies which responded to a survey believed that the perceived importance of IR has increased over the last ten years (Dolphin, 2004). In another survey, 97.8% of respondents, Top European Companies, perceived IR as very important; the sample was drawn from The Times 1,000 and excluded UK based companies (Marston and Straker, 2001). Australasian Investor Relations Association (2006) describes IR as expanding and growing in importance. Moreover, more and more countries are contemplating establishing National IR Societies to advance their local IR profession. For example, a group of IR professionals are planning to establish Turkey IR Society (Harrison, 2008a) whereas another group of professionals have already established the Middle East Investors Relations Society with the aim of improving IR practices across the Middle East (www.Ameinfo.com, 2008).

IR should not be viewed as function that create a better company image or buzz around the company (Martin, 2003) instead it should be viewed as a tool to create shareholders’ value (Rappaport, 2006). For example, SICOR, a US biotechnology company, increased its Market Capitalization from USD 300 million in 1998 to USD 3.3 billion in 2003 through effective IR activities (Metzker, 2006). This substantial increase represents an 11 folds increase in the company’s shares valuation.

The notion that communication between the company and its shareholder increases the company’s share valuation is very logical. The more information the investors have about the company’s operations, the lower the investment uncertainty associated with the company. This in turn leads to a higher relative share price valuation and the opposite holds true (Brown, 1992).

Several indicators of the importance companies attach to IR were found in the findings of a survey conducted by the Bank of New York Mellon (2007) covering 172 companies around the world. Consider the following findings of this survey:

(a)48% of IR Professionals communicate with their Chief Executives on daily or weekly basis,

(b)75% of IR Professionals communicate with Finance Chiefs on daily or weekly basis,

(c)67% of IR Professionals provide their board members with market intelligence information,

(d)69% of IR Professionals deliver presentations at Board Meetings and,

(e)78% of IR Professionals attend Executive Committee Meetings.

It is very clear from the above review that IR is not only an important activity but also growing in importance. This fact is supported by the survey results conducted by VMA Group (2008) in UK where it was found that 70% of participants reported that the IR Function contributions in companies are viewed positively by other departments.