Investor Relations and Regulation FD

We examine the differential impact of Regulation Fair Disclosure (Reg FD) on firms with an established professional investor relations (IR) presence at the time of the regulation. About 25% of publicly listed firms employ a professional IR member yet we know relatively little about the role of IR. We find IR firms more than double their level of public disclosure post-Reg FD consistent with Reg FD achieving its aim of reducing the selective disclosure of nonpublic information. Despite IR firms losing a potential competitive advantage, we find they do not suffer adversely in the post-Reg FD environment in terms of analysts, institutional investors, and information asymmetry. Indeed, IR firms show an increase in analyst following and institutional ownership, and a decrease in analyst uncertainty and information asymmetry relative to a control sample of similar non-IR firms. This implies that, while Reg FD may have reduced selective disclosure, IR firms may be relatively better positioned to navigate the more complicated regulatory environment.