Investor relations key to share price movements
GLOBAL - Companies should pay more attention to their investor relations in order to avoid major shifts in share price, according to a report out by Ernst & Young, accounting company, and Oxford Metrica, independent strategic adviser.
In a study of the top 100 increases and decreases in share price across the global top 1000 companies, it was found that rather than financial or operational risks driving shareholder value, analysts and, in turn, investors are more influenced by strategic risks and decisions.
Explains Deborah Pretty of Oxford Metrica, co-author of the report: "financial risks can be hedged away, and operational risks can be covered by insurance, so it is strategic risks that are much more likely to affect analysts' buy or hold recommendations. Poor investor relations, such as if a company cancels without warning a meeting with analysts, will also significantly affect analysts' perceptions."
Poor investor relations was found to be the third biggest source of sudden and major drops in value. In first and second places were a failure to adapt to changes in the business environment and customer mismanagement.