Does Disclosure Quality via Investor Relations Affect Information Asymmetry?

Abstract

High disclosure quality can be achieved through an effective investor-relations program and results in firm benefits such as enhanced market exposure, increased analyst coverage and institutional following. We examine the association between disclosure quality and information asymmetry where a checklist was used to evaluate a firm's Internet-based investor-relations practices. Firms with higher disclosure quality through their investor-relations activities have higher analyst following, more institutional shareholders, more active trading, and are larger in terms of market capitalisation. Bid-ask spread decreased with increased disclosure quality, although the effect of investor relations was weaker in the presence of other factors.