Market volatility is causing shift in practices

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Written by Charlotte Sayer

Thursday, 05 February 2009 12:37

Market volatility is causing shift in practices

Companies worldwide are shifting their investor relations (IR) strategies to deal with fallout from the credit crisis and boosting communications with analysts and investors. This is the principal finding from an annual survey conducted by The Bank of New York Mellon, a global leader in asset management and securities servicing.

Developed as a benchmarking tool for its depositary receipt clients, the survey, “Global Trends in Investor Relations,” was conducted by The Bank of New York Mellon in cooperation with the US National Investor Relations Institute (NIRI). Results were based on input from 270 companies across 42 countries, the highest response rate since the survey began in 2004. It looks at how publicly traded companies are managing IR practices in the current economic climate, including investor outreach, communications and disclosure and staffing issues.
“As in past surveys, this year’s findings show the importance that issuers attach to their investor relations programmes, both in their home markets and abroad,” said Michael Cole-Fontayn, chief executive officer of The Bank of New York Mellon’s Depositary Receipt Division. “While there is a positive correlation between a company’s size and its IR practices, in light of recent events in the capital markets, companies appear to have a regional bias to communications.”

Key findings of the survey include:
90% of all respondents have maintained or increased communications with analysts and investors due to financial market volatility in the last 18 months

The most frequent shift in IR messaging prompted by analyst questions was related to credit concerns (66%), followed by outlook horizon (50%) and cost-cutting (50%)

North American firms (73%) showed the highest tendency to shift IR messaging based on credit concerns, followed by Western Europe (70%). Asia-Pacific companies (54%) were the least likely to have shifted messaging on this issue

70% of respondents in Latin America and 69% in Asia-Pacific target “sustainability” (i.e. investment decisions based on environmental and social factors) investors as part of their overall IR strategy, compared to 36% of companies in North America

89% of companies proactively meet with hedge funds, though 27% of respondents said they did not know, or lacked enough information to judge, the quality of hedge fund managers they met through brokers. 21% said that brokers introduce them to too many small funds or to aggressive/high-turnover funds

Financial companies led all sectors in increasing their communications (67%) and were the most likely to have changed their outlook horizons due to recent market uncertainty (65%)

Only half of the financial sector companies that took part in the survey have a written crisis communications policy in place, compared to nearly two-thirds of the energy firms. Respondents in Western Europe (52%) and North America (46%) are most likely to have written crisis communications policies, compared to 40% of companies in Latin America, Asia Pacific and EEMEA (Eastern Europe/Middle East/Africa).