Is corporate communications doing investors a disservice? | 是公共关系对投资者不利

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INSEAD’s Knowledge online magazine had an interesting article about the correlation between public relations representation and investor returns. Companies that had less coverage tended to better from a financial perspective, which is counter to research I’d seen previously.

Back in the day at the start of my agency career with The Weber Group; my US colleagues used to tout a piece of research the summary of which was that companies whose CEO’s of publicly listed companies who were regularly mentioned in the media also had share prices that outperformed their competitors. Of course, a share price is more about equity buyer sentiment than financial fundamentals (hence the dot com boom that occurred around the same time).

Contrast this with comments from Joel Peress:

“We found a portfolio of stocks with no media coverage outperformed stocks with high media coverage by 3 percent per year after adjustments,” he told INSEAD Knowledge. “The return difference is particularly large among small stocks, stocks with low analyst coverage and stocks primarily owned by individuals. In these, the “no-media premium” ranges from 8 percent to 12 percent per year”.

Part of the reason, particularly with smaller companies is that there are less investors and a correspondingly higher risk that would merit the higher returns. But it does also prompt questions about the value of corporate communications. I must admit that many of the interviews that I have done to secure coverage for clients, in particular profile pieces has been more about executive ego (and getting on the radar of headhunters) rather than a business benefit.

The key question then is, does corporate communications do investors a disservice?