The Use of ICT in Annual Shareholder Meetings and Investor Relations: An Examination of the German Stock Market

Abstract

The topic of corporate governance has attracted immense attention from research, corporate executives, politicians, institutional and private investors and the press. One major issue in the context of ‘external’ corporate governance derives from the agency relationship between management and investors, which influences the degree of transparency and information asymmetry. Electronic media may help to reduce information asymmetry and increase transparency due to efficient ‘straight-through processing’ in the context of investor relations. Although trading shares over the internet is taken for granted, exercising shareholder rights on the internet is still uncommon. Although considerable research has been devoted to the legal restrictions of corporate governance enhanced by information and communication technology (ICT), less attention has been paid to economic issues. The purpose of this contribution is to examine the actual penetration of ICT into the ‘external’ corporate governance of Germany's publicly listed companies. Furthermore, this paper provides an approach for investigating whether the process of communication and interaction between investors and boards of companies has an impact on the return on the stock market. For research purposes, an index of ICT-related corporate governance for German companies is created. A regression-based on the Capital Asset Pricing Model (CAPM) indicates that stock market returns are negatively correlated to ICT usage in the aspect mentioned. In addition, the results indicate that companies may lower their refinancing costs by providing their investors with an efficient, electronic process of communication and interaction.