Regardless of whether you are investing Individually or institutionally, sourcing information when investing is as complex as it is critical. With external factors influencing how investors prefer to source information, is there a set preference of information gathering? That question can not be accurately answered. But how important is investor relations? and what is more influential – content that comes from the company, the media or analysts?
Investors are a specific public because of their unique “problem” of finding information to help them make informed investing decisions. There are a mass of differing opinions. Many Factors can play more or less importance to investors, and the most important thing to understand is that every investor has their own preferences above the generalisation. A great example of this is age. Certain demographics are proven to determine how an investor formulates an investment. Generically, younger investors take aversion to loss and risk, it is a natural instinct to steer clear of something that could potentially cause them to make a financial loss in the short run, instead of looking at longer term prospects. Now as an investor, this means spreading investments over various secure industries leading to a more diversified portfolio. It means not sinking too much money into a company and basing your rationalized decisions on information that has true substance, this could be an annual report.
Now this would be more applicable to investor relations as it’s direct from the company (similar to a media kit for a press release). Statistically speaking, it would legally have to be ‘correct’. But this information can still be bias. After all, the company needs investors. Sales figures can sometimes be skewed, quarterly reports can be manipulated and boosted with inconsistent high sales forged to attract investors. Middle-aged investors tend to take a more lenient approach to decision making in regard to risk. They look at long-term factors and if the company is actually going to make money in the future.
Further exploring those important determining factors, we now have a differentiated preference based on geographical location, thus again showing that there is no preference that is ‘set in stone’. Instead it depends on determining factors. In the USA, individual investors will look at the long term factors – quality of management, future economic outlook of the company and the future economic outlook of the industry of which the organisation operate in. Individual investors in America also tend to gather their information on their own, they prefer to research independently. In Germany, studies show them to process information differently to whether financial products were framed in an aggregated or segregated manner, which is actually less risky.
We also see prospected rationalized decisions formed by investors through modern day advances in business, Which can be linked to investor relations in regard to public relations. We see that in modern day, the importance of corporate and social responsibility has had a diverse affect on investors looking favorably on corporate consideration. This is only something that has developed recently.
Following the consensus that the information preference varies on individual demographics and evolving business, studies prove that investors overlook the past, and instead are more oriented around managerial projections. This being the more popular source for of information for investors. Studies show that this information is gathered from annual reports, annual meetings and conferences. Another important source of information as a derivative of the study was the marketing area of promotion and also social responsibility. The most interesting point from the research came from a study hypothesis which implied that investors look favorably on projected performance as a whole from analysts and news media. This is most applicable to public relations as public relations practitioners can respond to this research by releasing specific information which inform the publics of their managerial projections. If the research is liable, then this will attract investors making investor relations through public relations invaluable to investors.
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