What is 'Investor Relations - IR'

Investor relations (IR) is a department present in most medium-to-large public companies that provides investors with an accurate account of company affairs. This helps private and institutional investors make informed buy or sell decisions. A company's IR department also serves as a bridge for providing market intelligence to internal corporate management.

BREAKING DOWN 'Investor Relations - IR'

Investor relations ensures that a company's publicly traded stock is being fairly traded through the dissemination of key information that allows investors to determine whether a company is a good investment for their needs. IR departments are sub-departments of public relations (PR) departments and work to communicate with investors, shareholders, government organizations and the overall financial community.

The Function of IR Departments

IR teams are typically tasked with coordinating shareholder meetings and press conferences, releasing financial data, leading financial analyst briefings, publishing reports to the SEC and handling the public side of any financial crisis. Unlike other parts of PR-driven departments, IR departments are required to be tightly integrated with a company's accounting department, legal department and executive management team (CEO, COO, CFO).

In addition, IR departments have to be aware of the changing regulatory requirements, and advise the company on what can and cannot be done from a PR perspective. For example, IR departments have to lead companies in quiet periods, where it is illegal to discuss certain aspects of a company and its performance.

The Need for IR Departments

The Sarbanes-Oxley Act, also known as the Public Company Accounting Reform and Investor Protection Act, was passed in 2002, increasing reporting requirements for publicly traded companies. This expanded the need for public companies to have internal departments dedicated to investor relations, reporting compliance and the accurate dissemination of financial information.

Companies normally start building out their IR departments before going public. During this pre-initial public offering (IPO) phase, IR departments can help establish corporate governance, conduct internal financial audits and start communicating with potential IPO investors.

For example, when a company goes on an IPO road show, it is common for some institutional investors to become interested in the company as an investment vehicle. Once interested, institutional investors require detailed information about the company, both qualitative and quantitative. To obtain this information, the company's IR department is called upon to provide a description of its products and services, financial statements, financial statistics and an overview of the company's organizational structure.

The largest need, however, is an IR department's interactions with investment analysts who provide public opinion on the company as an investment opportunity. These opinions influence the overall investment community, and it is the IR department's job to manage these analysts' expectations.

RELATED TERMS
  1. IRS Publication 542

    A document published by the Internal Revenue Service (IRS) that ...
  2. IRS Publication 551 - Basis Of ...

    A document published by the Internal Revenue Service (IRS) that ...
  3. Department Of Labor (DOL)

    The Department of Labor is a cabinet-level U.S. agency responsible ...
  4. Banking Department

    A banking department is a state-specific regulatory body that ...
  5. IRS Publication 17

    IRS Publication 17 is a document published by the Internal Revenue ...
  6. IRS Publication 554

    A document published by the Internal Revenue Service (IRS) that ...
Related Articles
  1. Investing

    Uncovering the Securities Firm and How They Work

    Despite their importance, securities firms are still somewhat of a mystery to the average investor. Learn about what these professionals are involved with.
  2. Financial Advisor

    Retirees: Beware of These 6 IRS Red Flags

    Tax audits are stressful and can result in expensive fines. Here are six things to know about when it comes to sidestepping IRS scrutiny.
  3. Taxes

    Should You Represent Yourself vs. the IRS?

    If you face a personal or business tax audit, should you represent yourself vs. the IRS? In most cases, no. Here's why.
  4. Small Business

    Public Relations: Offering Businesses A Competitive Advantage

    To maximize the sales potential of any business, a public relations program should be part of the master marketing plan.
  5. Investing

    The Flow of Company Information

    Learn how to gather all the pieces before you start to put together your puzzle.
  6. Investing

    The Treasury and the Federal Reserve

    Find out how these two agencies create policies to manage the economy and keep it on an even keel.
  7. Insights

    Trump Budget Funds Pentagon with Cuts to Health, Aid

    "This is a hard-power budget, not a soft-power budget."
  8. Taxes

    What If You Don't Get Your 1099 & Other Must-Knows About This Tax Form

    They're arriving in the mail now. Don't ignore them, or you could be buying trouble with the IRS.
  9. Personal Finance

    Lead The Charge With Product Development

    Product development is having a huge impact in the field of finical services. Learn about it here.
  10. Investing

    Why Public Companies Go Private

    Privatization can give management more time to make money for investors, but at what cost?
RELATED FAQS
  1. What are the advantages and disadvantages for a company going public?

    Companies often use an initial public offering (IPO) as a way to generate capital. There are both advantages and disadvantages ... Read Answer >>
  2. What does "going public" mean?

    Going public refers to a private company's initial public offering (IPO), thus becoming a publicly traded and owned entity. ... Read Answer >>
Trading Center