By Elizabeth Wilmot

GOOD investor relations not only help a company keep its shareholders sweet, but also help boost the price people are willing to pay for its shares, according to a new survey.

An online study in April by the Singapore Management University (SMU) and the Investor Relations Professionals Association, Singapore (Irpas) has found that 89 per cent of institutional investors are willing to pay a premium for a company's shares if it has exemplary IR practices.

It found that 18 per cent of investors would pay a 5 per cent premium, 34 per cent would pay a 10 per cent premium, 13 per cent would pay a 15 per cent premium and 24 per cent would pay a premium of above 15 per cent.

The survey covered 38 fund managers based in Singapore who together represent 27 institutional investors. SMU associate professor of corporate communication practice, Dr Mark Chong, said: 'Research has found that a good IR programme can have a positive impact on corporate image, and there is a clear correlation between image and share price.

'Companies can and should invest much more in investor relations than they currently do - especially when doing so will result in a better valuation of their stocks.'

The survey asked fund managers to rate the extent to which good IR influenced their decision to buy shares in a company. On a scale of 1 to 10, 45 per cent of respondents gave IR a rating of 8 and 18 per cent a rating of 7.

The study found that institutional investors believed the credibility of management and investor relations officers (IROs) was the most important quality of a firm's IR.

Easy access to management and IROs, as well as timely and comprehensive disclosure of information were rated second and third most important, respectively.

Irpas general manager Joseph Chia said: 'Good IR requires a company to build credibility and trust over the long term. It is not just an ad-hoc activity that a company engages in only when it has good news to share or when it needs to raise funds.'

Respondents were asked to vote for Singapore Exchange-listed firms with the most exemplary IR practices.

According to the study, the winners - SingTel and Olam - share a number of best IR practices.

SingTel, for instance, organises annual board lunch meetings with institutional investors, while Olam encourages investors to visit its operations outside Singapore to boost confidence in the management team.

Mr Chia added: 'The No.1 quality that fund managers appreciate is credibility of senior management. It's about communicating good and bad news over a long time to build credibility and relationships with the fund managers.'

This article was first published in The Straits Times.