Ian Westbrook

Strategic Financial and Investor Communication (eBook, PDF)

The Stock Price Story

• Format: PDF

Produktbeschreibung

In today's aggressive marketplace, listed companies can no longer rely on their numbers to do the talking: communication counts. In Strategic Financial and Investor Communication: The Stock Price Story Ian Westbrook argues that share price is more a story than a number. This book will teach you how to tell your own story by guiding you through the fast-paced world of financial corporate communications with a professional's pragmatism as well as academic rigour.

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Produktdetails

• Verlag: Taylor & Francis
• Seitenzahl: 306
• Erscheinungstermin: 3. April 2014
• Englisch
• ISBN-13: 9781135087173
• Artikelnr.: 42828105

Autorenporträt

Ian Westbrook is Principal of Westbrook Financial Communications, Australia, and a part-time lecturer at the University of Sydney, having established the Financial and Investor Communication unit of study for postgraduate students in the Department of Media and Communications.

Inhaltsangabe

1. Applying Theory from Communication 2. Applying Theory from Management
and Markets 3. Storytelling and Application to Corporate Communication 4.
Linking Communication with Strategy, Story and Stock Price 5. Investment
Perspectives on the Corporate Story 6. Numbers and the Corporate Story 7.
Disclosure and Communication Content 8. The Financial Market Place 9.
Communicating with the Investment Community 10. Communicating with the
Business Media 11. Communicating with Shareholders 12. Transactions and
Issues - M&A, IPO & Crisis 13. Role and Responsibilities of a Chief
Communications Officer 14. Connecting Theory, Practice and the Corporate
Story
Chapter 1: Applying theory from communication
Theory underlying financial and investor communication is not a common
topic for practitioners, and yet there are many influences that can be
discerned, ranging from the Ancient Greek idea of rhetoric to post-modern
public relations theory. Important ideas along the way that connect with
financial and investor communication are persuasion through reasoned
argument, symmetric communication, the way stakeholder needs influence
communication, relationships, the value of context in in enhancing
understanding of corporate information and how messages are received. More
recent developments of theory have explored the way in which language is a
tool in competing for capital, a direct connection with investor relations.
Chapter 2: Applying theory from management and markets
A connection between communication and stock price can trace its beginnings
to establishment of the world's first stock exchange, in Amsterdam in 1602.
Since then, there has been a gradual transfer of power from owners - the
shareholders - to managers, with this paralleling a stakeholder
relationship from a communications perspective. With early 20th century
economist, Josef Schumpeter, having identified the economic importance of
financial markets in channelling capital to entrepreneurs, there is a
current era connection with investor relations which adopts competing for
capital as a primary objective. Since stock price is a critical factor in
this competition, it is important to appreciate two competing views around
how information affects prices - the efficient markets hypothesis and
behavioural finance. Another focus of investor relations is communicating
corporate strategy, establishing a connection with Michael Porter's five
competitive forces which define strategy. While the concept of shareholder
value has influenced communication in recent history, so too has modern
portfolio theory, in describing decision making in investment markets. Each
of these developments provides pointers to the content of financial and
investor communication.
Chapter 3: Storytelling and Application to Corporate Communication
From a corporate communication perspective, narrative is a way of
"interpreting the past, coping with the present and shaping the future."
The effectiveness of storytelling depends on the rapport between teller and
listener and storytelling can also evoke action, with parallels between how
a corporation's CEO communicates and the way this can influence
stakeholders and investors. A corporate story comprising narrative, facts
and numbers is not a fixed notion since, in the process of
"financialization", a significant variation in the numbers can enforce a
change in narrative when performance does not meet promise. There is
inevitably a link between the components of story and how companies
negotiate business challenges in the market place.
Chapter 4: Linking Communication with Strategy, Story and Stock Price
As management strategy has evolved from a focus on doing things right to
doing the right thing, there has been a parallel realisation that corporate
communication has a role in both strategic thinking and strategy
implementation. This connects with the content of financial and investor
communication being focused on explaining corporate strategy as well as
being integrated with factors like corporate credibility, trust and
reputation. There is a body of academic research which shows that
communication around each of these notions has a connection with stock
price. This in turn leads to a broad definition of investor relations as
combining finance, communication, marketing and compliance with the law, in
a process of relationship building which ultimately contributes to a
company's securities achieving a fair valuation.
Chapter 5: Investment Perspectives on the Corporate Story
An early text on security analysis argues that stock price is a legitimate
concern of management. This led to establishment of the corporate function
of investor relations which has evolved from an initial focus on media
coverage, then swinging towards a financial focus and, in the current era,
a convergence to communication. Among the influences in developing a
financial and investor communications strategy are elements of marketing,
although with a differing orientation to selling given the nature of
stakeholders, and persuasion, contrary to Grunig's model of corporate
communication. Other influences are converting information around a company
into communication, establishing "customer relationships" with the
investment community and shaping corporate information to the needs of key
stakeholders in developing a corporate story.
Chapter 6: Numbers and the Corporate Story
Since a lot of the content of financial and investor communication is about
a company's financial performance, it is important to have an understanding
of the numbers that are used in conveying the corporate story. This chapter
is intended to simplify this financial understanding, reducing a mass of
information in accounting and applied finance to just five numbers and one
principle, the time value of money. From this, readers will gain an
understanding of a company's three main financial statements, intrinsic
value per share and an appreciation of a primary objective of investor
relations, which is to reduce the cost of capital. The emphasis is on the
communications aspects of financial information.
Chapter 7: Disclosure and Communication Content
The close connection between information and stock prices has led to an
increasing amount of regulation around how companies communicate, in the
interests of reducing market manipulation. Since there is a tension between
the market wanting as much information as possible and companies preferring
to manage this process, especially regarding future performance, companies
have policies governing the disclosure of business and financial
information. Trends in disclosure are a recognition that there are value
drivers and intangibles beyond what appears in company financial
statements, requiring companies to make this information available if
investors are to gain a full understanding. Increasingly, regulators want
companies to go beyond restating the obvious and to give reasons why
certain events have taken place and how the business model works.
Chapter 8: The Financial Market Place
Appreciating the relevance of disclosure is helped by understanding how the
stock market works and its key players, the sell side and the buy side.
While extensive analysis is an important part of investment decision
making, so too are dealing room conversations based on corporate stories
that highlight industry positioning. An influence on communication with the
investment community is appreciating differing investment styles, since
this explains how investors focus on certain types of companies and the
holding period of their investment. Institutional ownership of listed
companies of 70-80 per cent makes them a key stakeholder in financial and
investor communication, with programs shaped to meet their information
needs in contrast to differing ways of relating to retail investors.
Chapter 9: Communicating with the Investment Community
Institutional investors and the investment community are the primary
stakeholders for financial and investor communication. Research findings
around communication to this stakeholder group highlight the importance of
language, the influence of image restoration, the ramifications from how
CEOs tell corporate stories and the overall influence of narrative. A key
event for companies is announcing profit results, triggering specific
communications strategies, along with other events during the year in which
companies engage with existing and potential investors. Clichés of the
stock market also have an effect on how listed companies communicate with
the investment community, while the corporate story provides a template for
encapsulating news flow and performance in comparison with expectations.
Chapter 10: Communicating with the Business Media
Successful communication with the business and financial media begins with
an understanding of how this section of the media views listed companies
and reports on them. Public relations sources have a significant influence
on media reporting and similarly, media coverage has an influence on stock
price, both positively and negatively. Successful communication with the
media involves understanding writing style, what makes news and the value
for journalists in having a relationship with companies. For company CEOs,
there are risks in dealing with the media, with the corporate story being a
guide to meeting journalists and managing good news and bad. Social media
is becoming increasingly used in investor relations.
Chapter 11: Communicating with Shareholders
Shareholders, who are the owners of a listed company, are a diverse group,
across institutions, individuals and employees. They also have differing
motives, expectations and demands. While these differences need to be taken
into account, the corporate story provides a unifying purpose for
communication with shareholders. Company websites have sections devoted to
this communication and the annual report is also a central document.
Dealing with activist shareholders has become an increasingly important
focus for communication, with activists using shareholder meetings to
agitate for an influence on executive remuneration, board composition and
company direction. Determining the interests of shareholders is also a
factor in dealing with short sellers.
Chapter 12: Transactions and Issues - M&A, IPO & Crisis
Transactions relevant to financial and investor communication are mergers
and acquisitions (M&A) and a first capital raising and listing on the stock
exchange (IPO). Crisis for a listed company also has an added dimension
related to dealing with the consequences of disclosure and how the stock
market reacts. Statistics show that, while the majority of M&A transactions
do not add value, a common ingredient in successful transactions is an
effective communications program, across preparation, implementation and
integration. Similarly with IPOs, a clearly articulated story has a
positive effect on returns. The negative effects of crisis can be prolonged
but swift implementation of a public relations plan speeds recovery. A
survey of investor relations practitioners showed that their top priority
in crisis is company reputation. Across all these events, it is the values
contained within the corporate story that can guide communications
campaigns.
Chapter 13: Role and Responsibilities of a Chief Communications Officer or
IRO
A common responsibility among those in charge of listed company
communication is that they are custodians of the corporate story. They are
the explainers of what a company does and how it is performing financially
in implementing its strategy. The role is pivotal in connecting a company
with its marketplace and stakeholders. It is partly weather vane, in
reporting within the corporation about the direction of winds from the
market and stakeholders, and partly a producer of the information that can
influence wind direction in terms of investment views about the company.
The main sensitivity is mastering an understanding of the strict boundaries
of disclosure. This means knowing what can be said and not said in
conversations around announcements and company progress. While the majority
of the focus is on aligning disclosure with communication to primary
stakeholders, the role also encompasses taking the corporate story to
potential investors.
Chapter 14, Connecting Theory, Practice and the Corporate Story
In his review of UK equity markets in 2012, Professor John Kay diagnosed
the problem of short termism, with this caused by an exaggerated faith in
the efficient markets hypothesis and undue reliance on information
disclosure, much of which has little value, in response to divergences in
knowledge. Disclosure has become information overload and the solution he
proposes is succinct narrative reporting. This highlights the value of a
crossover between theory, from communication and applied finance, and
practice in investor relations. The chapter covers six aspects of this
crossover - the narrative paradigm, rhetoric and persuasion, reconciling
disclosure with communication, media and stock price, relationships and
language as a tool in the competition for capital. This establishes a
framework for the more effective practice of financial and investor
communication, providing evidence for the proposition that share price is
more of a story than a number.