Most analysts cultivate their own sources through individual contacts and won't be swayed by an old-fashioned IR approach that focuses on placing positive stories in the mainstream press.
The press and equity analysts have had a long-standing symbiotic relationship. But a recent study dethrones any belief that analysts base their opinions on information from mainstream press financial articles.
"The media turns to analysts more than the analysts turn to the media," says Ron Finlay, director of investor relations firm Fishburn Hedges, London. Hedges was one of several PR execs involved in the survey of 70 analysts by GFC/Net, an international network of independent PR firms.
Analysts agree with the GFC findings: "I rely more heavily on my contact with management, suppliers, customers, other industry experts and competitors," says Aaron Edleheit, a general practitioner analyst with Individual Investors Group, New York.
In the U.S., analysts also find value in information culled through company presentations, annual reports and other corporate publications more than the mainstream press, according to the probe.
The study, "Communications with Internal Capital Markets," carries weight for IR pros for two reasons:
The study indicates that the global market has made the IR discipline even more complex.
Execs steering these programs should consider visiting foreign markets where their employers have a presence to conduct focus groups or set up teleconference calls with analysts if distance is a problem. Nothing serves as better proof how the job of managing global IR has changed than the recent economic crisis in Asia.
Burson-Marsteller, for example, is working with the South Korean government to help repair its image in a financial community where corporate honesty, disclosure laws and credible accounting practices have been lacking.
BM isn't discussing the specifics of its work in South Korea, but we've learned it is helping leaders learn more about democratic concepts of financial disclosure.
In IR, It's Not A Small World After All
The GFC/Net study breaks down analysts' preferences for information based on markets, including key foreign cities such as London, New York, Tokyo and Zurich.
Although findings vary significantly according to region, some general conclusions can be drawn. They are:
- The trade press ranks second or third in every region as an information source;
- On a scale of 1 to 6, analysts gave individual contacts an average score of 5.3, while company presentations ranked 4.6;
- The combined media earned a 3.9 and shareholder meetings were considered the least valuable information source, with the exception of France;
- News providers, such as Reuters and Bloomberg, are considered "qualitatively different" from the daily or less frequent media.
But the study also uncovers the differences between financial analysts and their counterparts in various major financial centers.
For example, wire services and the print media ranked first or second in all countries but ranked seventh in the U.K. And corporate Web sites and the Internet were ranked as key sources in Japan, the U.K. and the U.S.
"This underlines the changing role of the traditional press as a provider of investigative reporting and no longer a useful tool for information that can be found more quickly and conveniently elsewhere," the study states. (Trimedia, 212, 888-6115; Aaron Edelheit, 212/843-2777; Ron Finlay, 011/44/171-839-4321)
Applying the Findings
Consider these questions when designing your IR programs:
- What is the size of my company and what are the best practices expected of companies of similar size around the world?
- What is my sector of activity and what are the best practices in that sector?
- What is the nature of information I want to communicate and the types of media I should be targeting?
- How visible is my company in the media in each of the major countries?
- What sources of information are used to access information on my company?
- What are local practices and regulations that have an impact on my communication? What are the target's expectations and what are the legal disclosure requirements?
- How can I best integrate the trade press, highly utilized by analysts, into my communications strategy?
- Which local actors in the financial community are best placed to help me communicate and receive information?
- How can I best use local branches or subsidiaries as conduits of information toward the financial community?
Source: GFC/Net