Abstract
Prior research has found that having better investor relations (IR) practices contributes towards improved share prices, liquidity of shares and analyst following. The main aim of this study was to determine the extent to which JSE-listed companies comply with international best practice guidelines for IR practices via the company’s website. A secondary objective was to arrive at an opinion regarding the stage of internet adoption for IR practices in which JSE-listed companies find themselves, based on Hedlin’s (1999) three-stage model. A checklist of 201 items was used to assess the websites of 205 JSE-listed companies from the beginning of July to mid-September 2012. The average online IR score for all 205 companies was found to be disappointing, although the top 100 companies in South Africa performed better than companies in other emerging and developing economies, but worse than companies in advanced economies, where size is probably the main differentiator. Bandwidth is also a constraining factor for online IR quality in South Africa. We conclude that instead of moving towards stage III (HTML, video and audio) of Hedlin’s model (1999), JSE listed companies still seem to find themselves in stage II (paper-equivalent PDF’s). This should concern Chief Financial Officers (CFOs), as effective and efficient communication with investors could contribute towards attaining optimal share prices and improved liquidity and analyst following.
Highlights
Following the 2008 global financial crisis, the South African Institute of Chartered Accountants (SAICA) surveyed the chief financial officers (CFOs) of the Johannesburg Stock Exchange (JSE’s) top 40 companies in 2010 on their views of how their roles and responsibilities have changed
We developed a checklist from the second edition of Designing Websites to Maximize Investor Relations Usability – Guidelines for Investor Relations (IR) on Corporate Websites (Loranger & Nielsen, 2009)
Six years passed between Loranger and Nielsen’s 2003 and 2009 investor relations (IR) usability studies, yet they found in their 2009 study that investors were still viewing or using websites in the same way (Loranger & Nielsen, 2009:7)
Summary
CFOs reported that in 2010, and for the three years, communication management would be the third most important soft skill after leadership and problem-solving skills (SAICA, 2010:29). 58 per cent of CFOs indicated that they envisaged spending a lot or even most of their time on investor, stakeholder and market liaison and communication over the three years. The communication of information and insight between a company and the investment community. The Investor Relations Society (IRS, 2013) defines IR activities as “... This process enables a full appreciation of the company’s business activities, strategy and prospects and allows the market to make an informed judgement about the fair value and appropriate ownership of a company.”
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