Introduction
External legal restrictions and internal resource limitations forces businesses to adopt a one-way financial communication and investor relations strategy characterized by biased risk communication and a restricted community discussion. Such a one-way Financial Communication and Investors Relations (FC & IR) adversely affects risk management, particularly for investment communities and inexperienced and new investors. On the contrary, strategic development of a pro-social FC and IR system channels an organization’s public relation and investor relations initiatives to optimization of society’s functionality (Benington, 2011) . Consequently, this study recommends a holistic financial communication and investor relations approach that not only addresses disclosure and communication needs of actual and potential investors but also upholds the corporate social responsibility or moral duty of an organization to disclose, candor and transparency.
Financial Communication and Investor Relation (FC & IR) Approaches
Investor relations (IR) encompasses an organization’s strategic management activity that combines communication, securities law compliance, finance, and marketing. Financial communication departs from IR in terms of its broader public coverage and scope of work in an organization. In practice, financial communication is a multifaceted system that includes three major subsystems (Edenius & Rämö, 2009) . The first one is the company’s system comprising the information coding and source operations as the stage of financial information in preparation for dissemination via multiple mediums. Second is the message subsystem, which consists channel and message implemented as a communication medium or vehicle and involves financial information and its delivery means. The last subsystem is the receiver, which comprises receiver and decoding processes and concerns investors’ reception and interpretation of financial information.
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A multitude of disclosure theories informs managers ’ decisions on reporting and disclosure of corporate information. Voluntary disclosure theory, particularly analyzes managers’ disclosure and reporting, decision-making within a capitalist market context. In particular, voluntary disclosure theory analyzes predictors and economic outcomes of various corporate disclosure behavior. Voluntary disclosure theory, therefore, underscores the importance of strategic financial communication through coordination of an organization’s communication strategy with its common corporate strategy.
An active and sustainable disclosure strategy is particularly an important consideration by executives for its potential benefits to small, unpopular firms as well as firms launching new technology or industries that are politically sensitive. Research on stakeholders' information needs further emphasizes the importance of a corporate disclosure strategy in the improvement of financial communication operation (Abughazaleh, Qasim & Roberts, 2012) . Such studies include grounded theory predicated researches that underscores the role of external and external structures, disclosure status, and opportunities and norms perceptions in disclosure outcomes conditioning. In particular, grounded theory posits disclosure status a durable internal inclination of disclosure, management, which can lead to a manifestly uncritical embrace of organizational norms and rules or ritualism, or in a tendency to pursue firm-specific benefits in disclosure preparation and interpretation or opportunism. Furthermore, latest studies underscore the importance of disclosure decisions and feedback outcomes on corporate communication. In particular, contemporary disclosure theories point out that a firm continuously grapples with decisions to adopt secrecy or semiprivate, public, private disclosure about its corporate financial information. According to grounded theory, firms opt for public disclosure in cases of mandatory disclosure, but whereby the information is voluntary, secrecy often triumph over private disclosure. Generally, case studies reveal a cost benefit based decision-making in the choice of a voluntary disclosure strategy.
Reputational Capital of Financial Communication and Investor Relation Strategy
Multi-period market report shows that disclosure outcomes create confidence and understanding conditions in the market, apparent to firms via market outputs as reflected on condition of the stock mark et (Kim, Yoon, Soh & Park, 2014) . A typical example is Dortok (2006) study of Turkey’s “Most Admired Companies” between 2003 and 2006 as listed by the Turkey-based magazine Capital. Dortok (2006) study of ten of the bottom and top ten companies in the Capital magazine list shows a significant relationship between the high corporate reputation of the top ten companies and their emphasizes on internal communication. In particular, Dortok (2006) study revealed that the top ten “Most Admired Companies” attached great weight to measurement in their operations. Furthermore, the companies believed in the predictive importance of commitment to their business outcomes. Consequently, the companies developed, implemented and effected internal communication plans more frequently compared to the bottom ten companies. Furthermore, Dortok (2006) study revealed that the top ten “Most Admired Companies” also believed in the internal communication influence on corporate reputation. The study, therefore, affirms the predictive relationship between an organization’s internal communication operations and its corporate reputation (Laskin, 2006) .
Situational Crisis Communication Theory Application in Financial Communication and Investor Relations
The situational crisis communication theory provides a theoretical framework for planning, development, implementation and practice of an effective financial communication and investor relations system in an organization (Claeys, Cauberghe & Vyncke, 2010). Besides its focus on crisis management, situational crisis communication theory, henceforth referred to as SCCT, offers a theoretical mechanism and tools in anticipation of stakeholders’ reaction to organizational dynamics with respect to the reputational threat or opportunities presented by the organizational circumstances or events. Furthermore, SCCT helps in projection of stakeholders’ reaction not only to an organization’s event or circumstance, but also to the intervention strategies deployed by the organization to respond to the event or circumstance.
SCCT offers an ideal evidence-based theoretical framework for analyses and management of organization’s reputation capital across a variety of organizational circumstances and events. An organization’s reputation capital refers to stakeholders’ collective evaluation of how well the organization fulfills the stakeholders’ goals in respect to its behavioral history. As an evaluation or perception component, reputations are therefore, unfavorable or unfavorable. On the other hand, stakeholders refer to any group of people who have influence or are influenced by the organization’s behavior. Scholars recognize the value of reputation as intangible capital of an organization (Dortok, 2006) . Reputational capitals can create investment motivations, attract high-performance skills, create a competitive edge, attract clients, improve the financial rating, increase return on investment, and generate positive rating by financial analysts.
SCCT Framework for Financial Communication and Investor Relation
SCCT theory is founded on Attribution Theory. Attribution theory rests on the premise that individuals search for events causes, particularly unexpected and detrimental events (Pang, Jin & Cameron, 2010) . According to attribution theory, an individual attributes an event responsibility and face an emotional response to the event. In particular, attribution theory cites sympathy and anger as the key emotions triggered by a negative, unpremeditated event (Kangasharju and Nikko, 2009) . According to attribution theory, responsibility attributions and its associated emotions act as action motivators. Attribution of responsibility for the detrimental event to a person evokes negative behavioral reaction in the form of anger. On the contrary, dissociation of a person with a detrimental event evokes a sympathetic behavioral reaction.
SCCT exploits attribution theory paradigm. In particular, attribution theory relates stakeholders ’ perceptions of organization’s personal control of its situational circumstances and an organization’s reputational scores (Coombs, 2007) . Attribution theory framework exploited in SCCT provides an ideal theoretical framework and a tool for planning, financial communication and investor relations strategies. In particular, attribution theory paradigm informs an organization’s strategic framing of its financial communication and investor relations in a variety of communication channels and in respect to diverse target audience. Communication frames basically entails emphasis or salience and function on two interrelated levels, including thought frames and communication frames. Communication frames relate to the presentation format for information in a message, including phrases, words and images (Drake, Roulstone and Thornock, 2011) . A typical example is the natural features of a media presentation of a circumstance in a story.
On the other hand, though frames relates to the cognitive systems like schemas or scripts utilized by people to interpret information (Macleod, Scriven and Wayne, 1992) . Communication frames influence thought frames. In particular, how a message is framed influences the way people define, understand, and attributes the causes of an organization’s situation. Mass communication studies reveal that the way media frame events or situations influences political judgment (Crowley, Huang and Lu, 2018) . Evidently, communication frames emphasis specific values or a fact, which makes them critical in personal decisions.
A communicator ’s choices of specific emphasis components in a message, create a framing effect. Recipients of such message direct their concentration on the emphasized components as the basis for their judgment and opinions. Organization’s events and situations offer variety of communication frames with specific characteristics. Specific aspects of a situation or event give a hint of the thought frames invoked by the event or situation on stakeholders in respect to stakeholders’ interpretation or perception of the crisis. Strategic financial communication and investor relations therefore entail exploitation of situational or circumstantial cues to project stakeholders’ perceptions or interpretations of communication’s and then accordingly editing the communication frames by stressing on certain cues for a desirable stakeholders’ thought frames that preserves the organization’s reputation (Verlag, 2017) . The cues comprise information on whether the causes of the situation or event are internal or external, intentional or accidental and human error or technical error (Coombs and Holladay, 2010) . SCCT therefore emphasizes the importance of stakeholders’ perception of a situation or event as malicious, accidental or criminal negligence. The situation, event or communication frames influence stakeholders attribution of the situation or event for an organization.
Communication Needs of Various Stakeholders
All stakeholder groups are target of organization ’s financial communication and investor relations (FC & IR) strategies. Nevertheless, organizations FC & IR strategies should focus more on specific stakeholders who impact an organization’s investment. FC & IR strategies target two broad categories of stakeholders, including external and internal stakeholders. External stakeholders comprise investors such as potential shareholders, shareholders, and owners of the founders of a company as well as the financial industry, including advisers or analysts, financial media, and finance managers (Conyon, 2016) . Other external stakeholders include partners such as supply chain vendors, trade associates, and industry coalitions as well as communities, including non-governmental organizations or cultural groups, strategic corporate social responsibility partners, and local or regional operations (Myers and Sadaghiani, 2010) . External stakeholders also include enabling public such as local communities, trade agreements, industry affiliations, and local or state departments as well as governing bodies such as regulatory, state, legislative, federal, and local government as well as judicial branches. On the other hand, internal stakeholders include boards of directors, finance teams, employees and their affiliate unions, contractors, professional fiduciary services, chief executive officers, chief financial officers, management teams, accounting teams, strategic partners, and reporting teams (Zilkha, 2003) .
Investors are at the heart of investor relation strategies as the key target of an organization ’s social performance. Consequently, a key goal of investor relations strategies is to minimize risk perception among shareholders and prospective shareholders in order to raise an organization’s investment (Chang et al., 2006) . In particular, trust-based investor-organization relations determine the level of investors’ perception of investment risks. Trust is therefore a key requirement of investment decisions and therefore investor relations involves management of trust for investors. On the contrary, immoral management and unethical decisions ruin share price of an organization as investors are concerned about an organization’s ethics.
Similarly, markets, society, and associated legislations expect organization ’s to deploy transparent monetary and nonmonetary correspondence with shareholders. Furthermore, ethics demand a higher FC & IR standards characterized by a frank, candid, and honest situational report of necessary information. The interplay between an investment and a multiplicity of fluidly unstable and unpredictable environmental challenges further makes transparency a key aspect of financial communication (Bowen, Moon and Kim, 2017) . In particular, organizations should fully reveal information to the market or public as investors are concerned not only on the financial rating of a company, but the ethicality or fairness of an organization. Investors, therefore require truthful information. In a typical or normative organizational scenario, the organization should treasure accuracy, truthfulness, and ethical correspondence across its mission statement and organizational culture.
Internal stakeholders play a key role in definition of an organization ’s mission, goals, norms, ethical values and goals, especially through strategic communication and leadership of an organization (Vries., Bakker-Pieper and Oostenveld, 2009) . For instance, strategic communicators and leaders can unconsciously or deliberately emphasize the key values practiced within an organization. Such key values that facilitate interaction within an organization, especially on FC & IR operations should incorporate virtuous ethical values like veracity, reflexivity, justice, honesty, candor, and duty. Likewise, FC & IR operations require an organizational culture characterized by ethical concerns as an integral component of the organization’s mission and vision for a consistent, thorough and stable decisions-making for improvement of the organization’s reputation. In particular, a transparent communication demonstrates the confidence of an organization, which in turn improves its reputation. Likewise, ethical decision-making and communication creates trust and dependability amongst stakeholders, which similarly impacts the organization’s reputation. A positive cultural reputation of an organization consistently increases investment (Wierzbicka, 1994) . Furthermore, positive culture positively influences organization's trustworthiness to its actual and potential investors.
Ethical decision-making in respect to nonmonetary communication and transparent disclosure of information in respect to financial communication builds high interactions amongst investors as investors consider organization ’s moral elements. In particular, investors exploit organization’s transparent financial communication to plan for share price instability in the volatile share market (Saxton and Anker, 2013) . Similar ethical decision-making, organizational behavior such as corporate social responsibility demonstrates ethics of an organization to investors and also helps in creating trust with the public.
Investor relations further involves management of organizational issues relating to the investment environment as a sizable number of investors take investment as a social improvement tool. Evidently, the latest concept of social responsibility investors (SRIs) implies that a considerable number of investors are not exclusively concerned about financial returns. Instead, SRIs concept means that social and ethical concerns similarly serve a key role in investor relations. SRIs shows a paradigm change in society-organizations, relations in respect to public relations. In particular, the emergence of SRIs reflects a change in investor relations to an increasingly robust communication form. SRIs exhibit completely different IR criteria from conventional IR including ethics in investment decision-making. In particular, SRIs focus on organizational approach to social challenges, including equal job opportunities, human rights, environment, and labor rights. Such challenges have put pressure on organizations since immoral or unethical elements cause distrust that in turn threatens the sustainable stability of the business.
Corporate Social Responsibility of Organization’s Financial Communication and Investor Relations
Companies also have a corporate social responsibility to uphold positive relations with their neighborhood society since their activities should adhere to both legal and social obligations. Most scholars underscore a sense of business responsibility for organizations towards their partners and neighborhood community. In particular, scholarly evidence shows that building a good relationship and collaboration with the community helps organizations to realize a good rating within that community. Furthermore, social partners ’ commitment enables an organization to broaden its business and gain popular support. Scholars also identify a social license of organizations to run through perceived community embrace of the company’s local activities. Lately, industries carrying out local activities are under increasing pressure to get a social license to run at the community’s locality as a measure to avoid potential expensive conflict and entanglement with social risks. Moreover, loyalty theory posits that crucial public knowledge of participation of an organization in support of the local community nurtures loyalty in relation to the organization amongst influential public personalities.
Corporate social responsibility (CSR) also offers a novel strategy for improvement of FC and IR operations effectiveness to improve organizational reputation amongst public bodies such as employees, suppliers, customers, and regulators (Pérez and Bosque, 2017) . Case studies show that different stakeholders, including customers, governments, employees, and the media respond to business’s CSR operations more favorably compared to the attention given to its mainstream corporate activities (Saxton, 2018) . Improvement of an organization’s CSR reputational capital requires exploitation of the organization’s mission, values, financial outcomes, and vision to measure CSR operations match with the essential values of an organization in order to improve ethical authenticity and reflexiveness. In most cases, consumers negatively react to CSR activities considered as driven by stakeholder interests as opposed to values driven CSR initiatives. Furthermore, case studies reveal that consumers chastise firms when they perceive dishonest motives towards CSR efforts of a corporation. Instead, stakeholders look forward to logical support of social issues by corporations, especially those related to the key corporate operations of an organization.
Holistic Approach to Stakeholders and Investors Communication
The principle goal of financial communication and investor relations management is to promote trust and reduce uncertainty, risk for creation of a good investment environment. Investor relations management therefore goes beyond the management of financial communication to the public relations strategy for management of key stakeholders. Investor relations are therefore holistically entails relationships, maintenance and image-building with an organization ’s financial publics, most of whom have investment interests in an organization. A wealth of scholarly literatures emphasizes on the importance of investor relations practitioners focus on long-term relationships rather than ephemeral image or short-term profit.
Furthermore, stakeholders ’ financial communication and investor relations management go beyond focus on economic stability, the bottom line, solvency, and economic stability to their moral duty for transparency, disclosure, and candor. Besides a company’s managers and executives, all stakeholders both external and internal have an ethical responsibility to uphold integrity in disclosure, including analyst publics, community publics, the organization’s lobbying or public affairs, regulatory publics, financial media, and industry groups. Ethical principles that guide stakeholders’ interactions and investors’ relations are predicated on deontological theories of duty in transparency, disclosure, candor or forthrightness. Such ethical principles are characteristically captured and practiced through implementation of corporate social responsibility measures that showcase the organization vales and its commitment to communities and stakeholders with which it associates.
Ethical communication facilitates identification and solving of an organization ’s problems through the entrenchment of socially responsible discussions and ethical CSR outreach initiatives. In particular, robust ethical communication protocols build consistency and help the in accomplishing of stakeholders’ and public expectations of an organization. Furthermore, an ethical legacy build’s stakeholders’ trust in an organization and also reduce uncertainty perceptions of financial stakeholders including investors.
An ethics predicated financial communication and investor relation management also provide a novel strategy for effective improvement of investor relations precisely and excellently as the judgment of the fair value of an organization is done through evaluation of both financial and nonfinancial information. Also, whereas an ethical approach is applicable to the entire financial communication and investor relation activities, stakeholders base their fair judgment of the organization ’s communication or nonfinancial information. In particular, today’s stakeholders and publics show more interests in organization’s moral accountability than its financial performance. Today, an ethical approach in financial communication and investor relations (FC & IR) is therefore not an option for organizations, but a business duty.
Organization-public relations theory informs an ethical FC & IR. According to the organization-public relationship theory, companies must guarantee public satisfaction with their activities for building of good and sustainable relationships as corporate organizations have an economic, cultural and political relationship with the public. In particular, organization-public relationships theory underscores the social responsibility of organization to public interests as organizations are an integral component of the society where they run their operations.
Stakeholder theory also informs ethical approach in FC & IR. According to stakeholder theory, an organization ’s ethical activities forms part of public concerns and that public exploit moral lenses to judge an organization. Therefore, since stakeholders consider ethical behaviors as the responsible practice of an organization, ethical behavior recognition within an organization determines an organization’s reputation. In particular, evidence-based research evaluation of stakeholder theory underscores the importance of an organization’s common good in management of stakeholders’ relationships through consideration of duties that emerges from the common good.
Both stakeholders theory and organization-public relationship theory underscores the importance of ethical considerations in FC & IR strategies. In public relations, ethical approach entails focus on public interests. Likewise, ethical investor relations considerations help organizations to successfully manage relations with public members and investors. In practice, an ethical approach in FC & IR management entails choice of a normative, active investor relationship targets aimed at fulfilling authenticity and satisfaction needs of investors through the organization ’s decision-making process.
Conclusion
Predication of an organization ’s financial communication and investor relations operations on organization’s CSR to ethical accountability to stakeholders and the society at large creates sustainable reputational capital to an organization as opposed to the ephemeral public relation predicated FC & IR strategies. Financial communication and investor relation operations of a company should therefore not only focus on disclosure duty and responsibility of executives to shareholders, but also the executives CSR to ethical and full disclosure of information to all stakeholders.
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