IR Releases and their Effects

An extremely interesting article, titled "Are Investors Influenced By How Earnings Press Releases Are Written?" written by Elaine Henry takes a look at IR Releases and their effects on those who read them.

The article was written based on the two part study she had conducted. The purpose of the study was to gain an increased understanding of the firm-investor communication process. The first part of the study looked at genres of IR releases. She took a look at how the length, usage of numbers, complexity of information and tone of article had an effect on how readers reacted to the article.

The second part of the article used event studies to gauge the effect of the releases. Effects in share price, specifically abnormal returns. Abnormal returns are whether a firm's stock exhibited higher or lower returns around the time of an event.

Conclusions of the study found that longer press releases had less of an impact than short, concise releases. Positive tone induced a positive reaction. However, if the tone had overly praised the company or was too overboard with positivity, it contributed to a negative feeling. Numerical intensity could potentially create negative effects. Again, the amount of numbers used needed to be easily understood and couldn't flood the article.