Effective Financial Communication by Christian Pieter

1
INTRODUCTION TO EFFECTIVE 
FINANCIAL COMMUNICATION

In today’s globally interconnected and digital capital markets, the effective‑
ness of financial communication is crucial for ensuring sustained corpo‑
rate success. Corporate interactions with investors and a range of capital 
market intermediaries do not only affect the financial performance of the 
organization – they also contribute to various intangible assets, such as the 
corporate image or reputation. Numerous studies find that a company’s inves‑
tor relations (IR) can impact the company’s valuation. A number of practice 
guides explain how financial communication can or should contribute to a 
fair share price. In addition, studies from communication science highlight 
how good press relations can bolster investor sentiment. Increasingly, those 
practicing financial communication are called upon to assess and report on 
the effectiveness of their programs – and to reflect on the impact of their work 
on a range of stakeholders. Yet, a thorough account of the state of research 
on effective financial communication – including key concepts, theoretical 
perspectives, and empirical insights – is still missing from the literature.
The purpose of this book is to provide an accessible introduction to the cur‑
rent state of financial communication and investor relations research – and to 
extend our understanding of effective financial communication by highlight‑
ing distinct theoretical perspectives on its various responsibilities, objectives, 
and its management. The research field exploring and analyzing financial 
communication is quite young, it is growing dynamically, and it is spread 
across various disciplines. Therefore, when surveying, condensing, and pre‑
senting the state of research, it is necessary to take a position, to focus, and to 
highlight a specific perspective so that readers can make sense of key insights, 
understand core arguments, and derive salient implications. To that end, this 

book will center the effects and effectiveness of financial communication. 
This choice is motivated by three rationales:
First, while focusing on research, presenting theoretical perspectives and 
empirical findings, this book is not exclusively addressed to students and 
scholars of financial communication, but also to practitioners. While this 
book may not always be a light read  –  in fact, it is often quite dense 
and occasionally delves deep into theoretical considerations  –  it is also 
intended to be insightful to those shaping the practice of financial com‑
munication and IR. Learning about the evolution, key concepts and cur‑
rent lines of exploration in research on effective financial communication 
can help practitioners reflect on their field, their role and contributions, 
and future developments. This book offers a deep understanding of the 
institutional, social, psychological, and economic conditions of financial 
communication. Thus, it can help those working in the field become more 
effective financial communicators. To this end, each chapter culminates 
in a brief summary of implications for effective financial communication. 
Chapter by chapter, these summaries foster a sound understanding of core 
insights that shape today’s state of the professionalization and institution‑
alization of financial communication and IR.
Second, from a conceptual perspective, the effects of financial communica‑
tion are particularly fascinating. Theoretically, it isn’t entirely evident why 
corporations would engage in financial communication beyond the ful‑
fillment of regulatory requirements (Hoffmann, 2023). Similarly, it isn’t 
obvious why financial communication would engender effects that go 
beyond those created by ensuring transparency or reducing information 
asymmetries: Why is it possible or beneficial to engage in storytelling, why 
is it worthwhile to foster a positive image or reputation on capital mar‑
kets, why do trust and relationships matter? Why, thereby, is the National 
Investor Relations Institute (NIRI, 2023) justified in describing IR as a 
strategic management responsibility rather than just a compliance func‑
tion? Why has financial communication evolved so quickly into a field of 
strategic communication? Focusing on the effects and the effectiveness of 
financial communication allows for a systematic exploration of these criti‑
cal conceptual challenges.
Third, a number of trends are currently reshaping the fields of financial 
communication that highlight the importance of carefully considering its 
(desired) effects. Due to a rising public and regulatory focus on corporate 
sustainability, non‑financial information has become a critical element of 
corporate disclosures. A push toward an integrated perspective on finan‑
cial, governance, social, and environmental performance data currently 
is at the top of the agenda. Increasingly, corporations are called upon to 
disclose how their business impacts a variety of stakeholders. At the same

Effective Financial Communication by Christian Pieter