For listed companies, the main advantage of having IR best practices is that they minimize the penalty of the company's stock value by analysts and funds, given that inadequate governance and transparency practices create uncertainties.
However, transparency and governance policies alone are not enough to reduce uncertainties. They must be aided by an adequate communication program to ensure that this information is accessible and effectively reaches investors and analysts. In addition to the quality and quantity of information disclosed, such aspects as timeliness, frequency and how effectively this information reaches the intended target will determine the valuation gap.
This communication is often done using websites, mailings and press releases, among others. Of late, social media have been changing the way companies communicate with their stakeholders.
According to the Oxford Dictionary the meaning of relation is: "the way in which two or more concepts, objects, or people are connected; a thing's effect on or relevance to another." Thus, investor relations can be described as the connection of a company with its investors and the capital markets.
Given that investor relations relies on connections, one cannot deny the potential of social networks in aiding investor relations, as it is based on social connections and interactions to disseminate information. These means enable companies to communicate with their stakeholders effectively, allowing them to precisely reach investors and analysts in a way that other communication channels cannot.
Mailing, wires and press releases have good penetration but have limitations in the volume and frequency of information that can be sent or else the information may lose relevance and be perceived as spam. IR websites have enormous disclosure capability but are a very passive disclosure practice because investors have to access them and look for the desired information.
This channel can be aided by social media that contain hyperlinks to the companies' IR websites, thus increasing visibility and access to the latest corporate news, while also allowing users to comment on them and provide companies with immediate feedback. Social networks also allow users to share information with others on their networks, enabling dissemination and visibility of information.
Companies pioneering in IR practices have already joined this new global market trend. However, many IROs are still reluctant to take advantage of this effective communication tool such that the evolution in the use of social media for investor relations purposes has not kept pace with the rapid evolution in other uses like marketing, sales and relations. The arguments that social media are useful only for personal relationships and marketing are increasingly losing ground.
According to a survey conducted by LederMark Communications on social media use, 85% of the financial services professionals under 50 use social media, 40% affirmed that their presence in social media has resulted in business deals and 86% agree that social networking will be an important business development tool within five years.
Hence, it is increasingly difficult to deny the importance of this communication medium, which is not just a trend but a reality.
The IR Global Rankings ('IRGR') is the most comprehensive ranking system for investor relations websites, online annual report, corporate governance practices and financial disclosure procedures. The ranking is based on extensive technical proprietary research of publicly traded companies through a clear and transparent methodology and is supported by key global institutions such as Arnold & Porter; KPMG; MZ and Sodali.The evaluations are executed by a team of experienced investor relations professionals and are reviewed by independent audit and legal experts. The IR Global Rankings provides a unique and value-added external review of a company's communication process with analysts and investors worldwide and all participants can choose to receive an individual feedback with the key findings.www.irglobalrankings.com The IRGR Monthly Bulletin is an MZ publication. All rights reserved; partial or entire reproduction without express MZ authorization is strictly prohibited. The articles herein deal with matters of general public interest and are not intended to offer legal opinions or to induce investment decisions.Reprinted with permission. 
