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Document de travail 2017-33

Investor Relations' Quality and Mispricing

Houdou Basse Mama et Rachidi Kotchoni

Résumé :

We investigate the role of corporate investor relations (IR) in the correction process of mispricing. We provide robust evidence of accruals' mispricing for the sub-sample of firms with lower-rated IR. However, mispricing is more pronounced among firms with higher valuation uncertainty. Further analyses show that firms with higher-rated IR on average earn higher returns, and this relation is resilient to known risk/mispricing factors. More important, IR likely has countervailing effects on mispricing. IR may widen the information asymmetry among investors and concomitantly reduce future analyst forecast errors. Overall, high-quality IR appears to facilitate the market's ability to establish efficient stock prices.

Classification JEL : G12, G14, D82.

Mots-clés : Investor relations; Mispricing; Mishkin test; Information asymmetry; In- formation uncertainty.

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