Investor relations (IR) An analysis in the context of Vietinbank

VIETNAM NATIONAL UNIVERSITY, HANOI
SCHOOL OF BUSINESS
M
- H S B -
IX A D fcR SH ir CXCtLLC NCE
MAI THI HONG
INVESTOR RELATIONS (IR): AN ANALYSIS IN THE CONTEXT OF
VIETINBANK
Major: Business Administration
Code: 60 34 05
MASTER OF BUSINESS ADMINISTRATION THESIS
Supervisor: Dr. Nguyen Thanh Trung
Hanoi - 2011
ACKNOWLEDGEMENTS
To me, writing a Master thesis is a challenging task, which requires a lot of time and
efforts. My thesis couldn’t be completed without the supports of several people. In
this acknowledgement, I would like to give my thanks to all the people who have
given me a lot of supports in this thesis.
First of all, I would like to express my profound gratitude to my supervisor - Dr.
Nguyen Thanh Trung at Hanoi School of Business, who has supervised me during
the time of the thesis. His professional advice is really valuable for me to complete
this thesis.
And, I would like to give my special thanks to my family and my friends who
always stay by my side and support me in the research progress.
Hanoi School o f Business, October 2011
Mai Thi Hong
ABSTRACT
INVESTOR RELATIONS (IR): AN ANALYSIS IN THE CONTEXT OF
VIETINBANK
Mai Thi Hong
MBA Candidate, 2009 - 2011

School of Business - Vietnam National University, Hanoi
Supervisor: Dr. Nguyen Thanh Trung
October 2011, 86 pages
More than 10 years ago, the Vietnam stock market was established, as a
result IR activities appeared as a mandate of listed companies. Now, IR activities in
Vietnam haven’t developed yet. In most listed companies, IR activities are just
understood as basic information disclosure and investors’ rights fulfillment, these
companies don’t have any IR professionals. At the same time, there are a few
companies, which are aware of the importance of IR activities and they carried out
IR activities actively and professionally. In Vietnam, now IR is becoming more and
more popular with the appearance of many IR service vendors to support listed
companies.
Vietinbank has been equitized since 2007 and was listed in 2009 with the
stock code of CTG. Vietinbank now ranks the second in the banking system in terms
of the chartered capital and network, and CTG is in top 5 biggest market
capitalization in the stock market of Vietnam. At present, Vietinbank has more than
20,000 shareholders including: institutions and individuals, foreign and domestic
investors. In the 5 year strategy, Vietinbank is focusing on rapid expansion
nationally and regionally; therefore, it is very necessary to increase chartered capital
(tier 1 capital and tier 2 capital). Moreover, Vietinbank is promoting global
integration in terms of banking operations and funds mobilizing. Therefore,
establishing good relations with investors is very important, in other words,
Vietinbank needs to establish professional and standard IR activities.
At present, Vietinbank is evaluated to be a pioneer in IR activities in Vietnam
when Vietinbank is the first listed companies which established the IR division in
Investment department. More than that, Vietinbank always tries out many new IR
activities in Vietnam, for examples: investor day, market research, etc. However,
there is still a big gap between Vietinbank’s IR activities and the professional IR
activities that have been shaped in the world. The thesis is aimed to fill this gap.
The first chapter gives a brief introduction of the thesis, including: the

necessity of the thesis, the research aims and objectives, the research questions, the
research methodology, the scope of the research and the significance of the research.
The second chapter researches the current theories of IR activities. In this
section, the definition, objectives, audiences of IR activities are clearly defined.
There is not a perfect model to organize an IR division for all companies; the IR
division can report directly to the CEO, CFO, the chief of counsel department or the
chief of corporate communications department. An IR division should be composed
of one IRO (with or without one deputy IRO), several staff who are in charge of
different tasks of IR activities. Based on some models of implementing an IR
program, the selected model are 6 steps model: (1) identify the current shareholder
base (2) identify the suitable shareholder base (3) identify the gap of shareholder
base (4) Conduct market research (5) Select IR tools (6) Implement IR tools.
The third chapter gives an introduction of Vietinbank’s operations and the
process of equitization. This chapter also provides a careful analysis of IR activities
in Vietinbank, including the strengths and weaknesses. Some weaknesses of IR
activities in Vietinbank are (1) Vietinbank hasn’t applied any IR program model (2)
the structure of the IR division is not clear (3) some shortbacks with IR activities.
The forth Chapter presents the solutions/ recommendations for Vietinbank to
correct the weaknesses and to enhance IR activities. To maximize its full potential,
the IR division should receive enough acknowledgment from Vietinbank’s
management team. The IR division should put under the management of the BOM
instead of many levels of management as now. The IR division should be organized
with one IRO and several staff who are in charge of different tasks of IR activities.
The Chapter also provides details of how to implement an IR program in Vietinbank
through 6 steps. The suitable shareholder base should have balance between 4
categories of investors (individuals and institutions, domestic and foreign) and have
more foreign institutional investors. The market research finds out the characteristics
of each category of investors. Based on that, the 5th and 6th step present the detailed
actions to achieve the suitable shareholder base.
TÓM TẮT

HOẠT ĐỘNG QUAN HỆ NHÀ ĐẦU T ư (IR): NGHIÊN cứu TRONG
TRƯỜNG HỢP CỤ THẺ CỦA VIETINBANK
Mai Thị Hồng
Học viên MBA, niên khóa 2009 - 2011
Khoa Quản trị Kinh doanh, Đại học Quốc Gia Hà Nội
Giáo viên hướng dẫn: TS. Nguyễn Thành Trung
Tháng 10 năm 2011, 86 trang
Thị trường chứng khoán Việt Nam được thành lập hơn 10 năm trước cùng
với đó hoạt động IR xuất hiện như một nghĩa vụ của các DN niêm yết. Ngày nay,
hoạt động IR tại Việt Nam vẫn chưa phát triển. Tại hầu hết các DN, hoạt động IR
được hiểu một cách đơn giản chỉ là các hoạt động công bố thông tin và thực hiện
quyền nhà đầu tư, các công ty không có các nhân sự IR chuyên nghiệp. Cùng lúc đó,
có một sổ ít DN ý thức được tầm quan trọng của hoạt động IR và họ triển khai các
hoạt động IR một cách chủ động và chuyên nghiệp. Tại Việt Nam, hoạt động IR
đang ngày càng trở nên phổ biến hom với sự xuất hiện của các công ty cung cấp các
dịch vụ IR cho các DN niêm yết.
Vietinbank được cổ phần hoá từ năm 2007 và chính thức niêm yết trên HOSE
vào năm 2009 với mã chứng khoán CTG. Vietinbank hiện đang xếp thứ hai trong hệ
thống ngân hàng tại Việt Nam xét về vốn điều lệ và mạng lưới hoạt động và CTG là
một trong 5 cổ phiếu có giá trị vổn hoá lớn nhất trên thị truờng. Hiện tại, Vietinbank
có hơn 20 nghìn cổ đông bao gồm: các nhà đầu tư trong nuớc, các nhà đầu tư nước
ngoài, các nhà đầu tư tổ chức, các nhà đầu tư cá nhân. Trong chiến lược phát triển
trong 5 năm tới, Vietinbank tập trung vào việc mở rộng cả trong nước và quốc tể, vì
vậy, Vietinbank rất cần phải nâng vốn chủ sở hữu (bao gồm cả vốn cấp 1 và vốn cấp
2). Thêm nữa, Vietinbank đang đẩy mạnh việc hội nhập quốc tế về hoạt độn<_, ngân
hàng và hoạt động huy động vốn. Vì vậy, việc thiết lập mối quan hệ với nhà đầu tư
là rất quan trọng, nói một cách khác, Vietinbank cần thiết lập một hoạt động quan hệ
nhà đầu tư chuyên nghiệp và hiệu quả.
Hiện nay, Vietinbank được đánh giá là một trong những DN đi tiên phong
trong hoạt động IR ở Việt nam khi Vietinbank là người đi đầu trong việc thiết lập bộ

phận IR. Hơn thể nữa, Vietinbank luôn thử nghiệm các hoạt động IR mới, ví dụ: hội
thảo chuyên gia phân tích, hội thảo dành cho nhà đầu tư, nghiên cứu thị trường. Tuy
nhiên, vẫn còn một khoảng cách rất lớn giữa hoạt động IR tại Vietinbank và hoạt
động IR chuyên nghiệp đã được hình thành trên thế giới. Khoá luận này được đưa ra
nhằm mục đích giải quyết vấn đề này.
Chương đầu giới thiệu các nét chính của luận văn bao gồm: sự cần thiết, mục
tiêu của nghiên cứu, câu hỏi nghiên cứu, phương pháp nghiên cứu, phạm vi của luận
văn và các đóng góp của luận văn.
Chương hai nghiên cứu các lý thuyết hiện tại về hoạt động IR. Phần này trình
bày các định nghĩa, mục tiêu, đổi tượng của hoạt động IR. Không có một mô hình
chuẩn để tổ chức bộ phận IR có thể áp dụng cho tất cả các DN; bộ phận IR có thể
báo cáo trực tiếp tới CEO, CFO, giám đốc bộ phận pháp chế, giám đốc bộ phận
truyền thông của DN. Bộ phận IR thường bao gồm: 1 IRO - trưởng bộ phận IR (có
thể có hoặc không có phó trưởng bộ phận IR) và các nhân viên chuyên trách IR phụ
trách các mảng hoạt động khác nhau của IR. Mô hình triển khai hoạt động IR được
lựa chọn nghiên cứu trong khoá luận này gồm có 6 bước: (1) xác định cơ cấu cổ
đông hiện hữu (2) xác định cơ cấu cổ đông phù hợp với DN (3) xác định khoảng
cách giữa cơ cấu cổ đông hiện hữu và cơ cấu cổ đông phù hợp với DN (4) nghiên
cứu thị trường (5) lựa chọn các công cụ IR phù hợp (6) triển khai sử dụng các công
cụ IR.
Chương ba giới thiệu về hoạt động của Vietinbank và quá trình cổ phần hoá
tại Vietinbank. Chương này cũng cung cấp các phân tích kỹ lưỡng về hoạt động IR
tại Vietinbank, bao gồm các điểm yếu và điểm mạnh của hoạt động này tại
Vietibank. Điểm yếu của hoạt động IR tại Vietinbank là: (1) Vietinbank không ứng
vi
dụng một mô hình IR cụ thể nào (2) cấu trúc của bộ phận IR tại Vietinbank chưa
được xác định một cách rõ ràng (3) một vài điểm yếu khác trong các hoạt động IR
tại Vietinbank.
Chương bốn đưa ra các khuyến nghị nhằm khẳc phục các yếu điểm và nâng
cao hiệu quả hoạt động của hoạt động IR tại Vietinbank. Để phát huy tối đa tiềm

năng của hoạt động IR, bộ phận IR nên nhận được sự quan tâm thích hợp từ ban
lãnh đạo của Vietinbank. Bộ phận IR nên được đặt dưới sự quản lý của Hội đồng
quản trị thay vì nhiều cấp quản lý như hiện nay. Bộ phận IR nên bao gồm một IRO
và một số chuyên viên chuyên trách về IR để phụ trách các mảng hoạt động khác
nhau của hoạt động IR. Chương này cũng đưa ra chi tiết cách thức triển khai các
chương trình IR bao gồm 6 bước. Cơ cấu cổ đông hợp ỉý nên có sự cân bằng giữa 4
nhóm nhà đầu tư (trong nước và ngoài nước, tổ chức và cá nhân) và có thêm nhiều
các cổ đông tổ chức nước ngoài hơn nữa. Nghiên cứu thị trường chỉ ra các đặc tính
của các nhóm nhà đầu tư này. Trên cơ sở đó, bước 5 và bước 6 trình bày các hành
động cụ thể để đạt được cơ cấu cổ đông phù hợp.
TABLE OF CONTENTS
A CKN O W LE DGE M ENTS i
ABSTRACT ¡i
LIST OF FIG U RES xi
CHAPTER 1: IN T R O D U C T ION 1
1.1. Necessity of the thesis 1
1.2. Research aims and objectives
2
1.3. Research questions 3
1.4. Research methodology
3
1.5. Scope of the research 4
1.6. Significance of the research 4
1.7. The structure of the thesis: 5
2.1. IR definition 6
2.2. Objectives and benefits of IR 9
2.3. History and evolution of IR in the w orld 10
2.3.1. The first era - the communication era 10
2.3.2. The second era - financial era 11
2.3.3. The third era - The synergy era 11

2.4. The audience of IR activities
12
2.5. The IR division 15
2.5.1. The role o f the IR division in listed companies
15
2.5.2. The position of the IR divisions in the hierarchy o f companies

16
2.5.3. The responsibilities o f the IR division 18
2.5.4. The structure o f the IR division
20
2.6. The procedure for implementing an IR program in companies

23
2.7. IR tools 28
2.7.1. Corporate website 29
2.7.2. Blogs and Social Media 30
2.7.3. The Annual Report 30
2.7.4. Shareholder Letter 31
2.7.5. Financial A dvertising 31
2.7.6. Public Meetings 32
2.7.7. One-to-One M eetings 32
2.7.8. Roadshows 32
2.7.9. Reverse Roadshow 33
2.7.10. Conferences 33
2.7.11. Analyst and Investor Days 33
2.7.12. Conference Calls 34
2.7.13. Open Days 34
2.7.14. The Annual General Meeting (AGM)

34
2.7.15. Factbooks 34
2.7.16. Written Disclosure Policy 34
2.7.17. The Shareholder’s Guide 34
2.7.18. Corporate Social Responsibility Report 35
2.7.19. Fact Sheets 35
2.8. Chapter review 35
CHAPTER 3: IR ACTIVITIES IN VIETINBANK

37
3.1. An overview of Vietinbank 37
3.1.1. The history and development o f Vietinbank 3 7
3.1.2. Scope o f business 38
3.1.3. Organization chart 38
3.1.4. Business strategy 39
3.2. The overview of Vietinbank’s stock 40
3.2.1. The equitization process o f Vietinbank 40
3.2.2. Stock data records 41
3.2.3. Stock dividend records 42
3.2.4. Chartered capital raising 42
3.2.5. Shareholder structure o f Vietinbank 43
ix
3.3. IR activities in Vietinbank 45
3.3.1. The history and development o f the IR division in Vietinbank

45
3.3.2. The objectives o f IR division in Vietinbank.
45
3.3.3. Structure o f th e IR division
45

3.3.4. IR activities in Vietinbank 46
3.4. Evaluation of IR activities in Vietinbank

63
3.4.1. Strengths 63
3.4.2. Weaknesses 65
3.5. Chapter review 68
CHAPTER 4: RECOMMENDATIONS/ SUGGESTIONS TO
ENHANCE VIETINBANK’S IR ACTIVITIES

69
4.1. Organization of the IR division 69
4.1.1. The acknowledgement o f the BOD and BOM 69
4.1.2. The structure o f the IR division
70
4.1.3. Human resources 72
4.2. The process of implementing an IR program in Vietinbank

72
4.2.1. Identify the current shareholder base 72
4.2.2. Identify the appropriate shareholder base 73
4.2.3. Identify gaps in the shareholder base 73
4.2.4. Market research 74
4.2.5. Select IR tools & Implement IR tools

74
4.3. Chapter review 81
REFERENCES 83
X
LIST OF FIGURES

Item Figure Description
Page
2.1 Definition of Investor relations 8
2.2 The investor relations relationship framework
15
2.3 Investor relations organizational chart 20
2.4
The process of IR program
23
2.5
IR procedure in companies
26
2.6 IR procedure
28
3.1
The organization chart of Vietinbank
39
3.2 The movement of CTG adjusted price till now
41
3.3 Shareholder structure of Vietinbank
44
3.4
Structure of shareholder base
44
3.5 Vietinbank’s Roadshow introducing the listing of CTG in HOSE
53
3.6 Investor conference of Vietinbank
53
3.7
Vietinbank’s Analyst Day 2011

54
3.8
The process and criterion for individual’s investment decisions
58
3.9
The process of making investment decision of institutional
59
3.10
Vietinbank’s corporate website
62
4.1
Investor relations organizational chart
71
xi
LIST OF TABLES
Item Table Description Page
2.1 The target audiences of investor relations 12
2.2 Information source
17
2.3 Summary of IR tools 28
3.1 List of subsidiaries of Vietinbank
37
3.2 Stock dividend records 42
3.3
Lists of fund management companies that Vietinbank has met
during the last six months
49
LIST OF ABBREVIATIONS
AGM
Annual general meeting

BNS
Bank of Nova Scotia
BOM
Board of management
BOD
Board of directors
CEO
Chief executive officer
CFO
Chief financial officer
CTG
The stock code of Vietinbank in HOSE
FGD
Focus group
IDI
indepth interview
IFC
International finance corporation
IRO
Investor relations officer
IR
Investor relations
IFRS
International financial reporting standards
HOSE
Hochiminh stock exchange
Haste
Hanoi stock exchange
PBT
Profits before tax

PR
Public relations
SCIC
State capital investment corporation
SSC
State securities committee
CHAPTER 1: INTRODUCTION
1.1. Necessity of the thesis
The Vietnam stock market began in 2000 with the establishment of the
Hochiminh Securities Trading Center which became Hochiminh city stock exchange
(HOSE) in 2007. A second security trading center launched in 2005, Hanoi stock
exchange (Haste) and the two now have between them nearly 700 listed companies;
among them, nearly 300 companies listed in HOSE and nearly 400 companies listed
in Haste. Since that time the Vietnam stock market has had more than 10 years of
history with some notably big achievements.
When a company is listed on the stock exchange, that company must comply
with the laws and regulations of the stock exchange. These regulations may vary
from the disclosure of information to production of particular financial statements.
As a result of all of these compulsory tasks and the active promotion activities of
companies, a new business area has been created - Investor Relations (IR). In other
words, IR is a job that has only recently appeared in Vietnam - it is the activity of
listed companies to create a 2-way communication with investor communities.
With only a 10 year history of operating of the Vietnam stock market, IR
activities in Vietnam are not fully developed yet. In most listed companies, IR
activities are just understood as the disclosure o f basic information and investors’
rights fulfillment, these companies don’t have any IR professionals. At the same
time, there are a few companies, which are aware of the importance of IR activities
and they are carrying out IR activities actively and professionally. IR is becoming
more and more popular in Vietnam with the birth of many IR service vendors to
support these listed companies.

Vietinbank has been equitized since 2007 and was listed in 2009 with the
stock code of CTG. Vietinbank now ranks second in the banking system in terms of
the total assets and equity, and is in the top 5 biggest market capitalization in the
1
stock market of Vietnam. At present, Vietinbank has more than 20,000 shareholders
including: institutions and individuals, foreign and domestic investors. In the 5 year
strategy, Vietinbank is focusing on rapid expansion nationally and regionally;
therefore, it is necessary to increase chartered capital (tier 1 capital and tier 2
capital). Moreover, Vietinbank is promoting global integration in terms of its
banking operations and mobilizing of funds. Therefore, establishing good relations
with investors is very important, in other words, Vietinbank needs to establish
professional and standard IR activities.
At present, Vietinbank is evaluated to be a pioneer in IR activities in Vietnam
by many analysts as it was the first listed company to establish an IR division in its
Investment Department. Additionally, Vietinbank has been trying out many new IR
activities in Vietnam, for example: investor day, market research, etc. However,
there is still a big gap between Vietinbank’s IR activities and other professional IR
activities around the world.
The stock market in the world has a much longer history and IR activities
have a close relationship with the stock market. Many big stock exchanges in the
world have published guidebooks for IR activities. Most of big corporations in the
world have carried out IR activities a long time ago.
Therefore, it is necessary to research theoretic, models of IR activities to
apply to Vietinbank’s IR activities in order to build up a strong IR division within
the bank, which will contribute significantly to the overall strategy of Vietinbank in
the near future. This is the reason that the author chose this topic:
“Investor Relations (IR): An analysis in the context of
Vietinbank”
1.2. Research aims and objectives
The aim of this thesis is to (1) propose a suitable model for an IR division (2)

propose a model to implement IR activities (3) give some recommendations to
enhance the current IR activities in Vietinbank. The ultimate aim of this thesis is to
2
make the IR activities in Vietinbank more professional and efficient, achieving
international standards. In order to do that, there are some objectives that should be
reached:
• Thoroughly research current theories of IR activities, including: models of
constructing the IR division, models of implementing IR programs and IR
tools.
• Analyze Vietinbank’s current IR activities and define its strengths and
weaknesses.
• Give recommendations to Vietinbank for the organization of its IR
division, implementation of its IR program and improving its IR activities
in general.
1.3. Research questions
In order to give recommendations to enhance Vietinbank’s IR activities, the
thesis is going to find answers to the following questions:
Major research questions:
• How to improve Vietinbank’s IR activities to support the bank’s general
development strategy?
Minor research questions:
• What is a suitable model to organize the IR division in Vietinbank?
• What is a suitable model to implement an IR program in Vietinbank?
• What should be done to implement IR program in Vietinbank to make it
more efficient and support the general strategy of Vietinbank in the
future?
1.4. Research methodology
In the thesis, the author adopts analytical methods to analyze both domestic
and foreign material to identify the most suitable IR theories and models for IR
activities in Vietinbank.

Both primary and secondary data are used in the thesis to analyze the current
situation of IR activities of Vietinbank. Based on the theories of IR and the author’s
3
own judgment, the author presents the strengths and weaknesses of the IR activities
in Vietinbank and gives suggestions to enhance the bank’s IR activities.
1.5. Scope of the research
The thesis aims to find solutions to improve IR activities in Vietinbank. The
thesis focuses on:
• Study the models of organizing the IR division, models of
implementing IR programs and IR tools that are widely used by big
corporations.
• Analyze different aspects of the IR activity in Vietinbank: the way that
the bank organizes its IR division, the IR tools employed and IR
programs, etc to find out both the strengths and weaknesses of IR in
Vietinbank.
• Give suggestions to enhance IR activities within the bank.
1.6. Significance of the research
The thesis has both theoretical and realistic significance; it could be a good
reference material for: (1) Leaders and the IRO o f Vietinbank (2) IR professionals
(3) researchers of IR activities in universities and research institutes.
The thesis provides a review of IR theories that covers many aspects of IR
activities including: models of organizing an IR function, models of implementing
IR programs and many IR tools that are widely used in the world now.
The thesis provides the careful analysis of IR activities in Vietinbank, one of
the companies pioneering IR activities in Vietnam. All the current IR activities and
tools, along with its strengths and weaknesses are presented.
The thesis also provides the recommendations that are applicable to the
current IR activities of Vietinbank: the models of organizing the IR division, the
way to implement IR programs in Vietinbank and some suggestions to enhance the
IR activities in general in Vietinbank.

4
1.7. The structure of the thesis:
The thesis is composed of 4 chapters:
CHAPTER 1: INTRODUCTION
This Chapter gives a brief introduction to the thesis, including the necessity
of the thesis, the research aims and objectives, the research questions, the research
methodology, the scope of the research, the significance of the research and the
structure of the research.
CHAPTER 2: LITERATURE REVIEW OF IR ACTIVITIES
The second Chapter focuses on the theories of IR activities, including: the
definition, the purpose of IR, the organization of the IR divisions, models of
implementing IR activities and IR tools. Based on these theories, the author will
point out which theories can be applied to the current situation at Vietinbank.
CHAPTER 3: THE CURRENT SITUATION OF IR ACTIVITIES IN
VIETINBANK
Analyze the current situation of IR activities in Vietinbank: the structure of
the IR division, the way to carry out IR activities, some highlighted IR activities.
Present strengths and weaknesses of IR activities in Vietinbank.
CHAPTER 4: SOLUTIONS TO ENHANCE IR ACTIVITIES IN
VIETINBANK
From the theories studied in the second Chapter, the author gives solutions to
all the weaknesses of IR activities in Vietinbank that will make the IR activities
more professional.
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CHAPTER 2: LITERATURE REVIEW
2.1. IR definition
According to NIRi {National Investor Relations Institute): “Investor
Relations (IR) is a strategic management responsibility that integrates finance,
communication, marketing and securities law compliance to enable the most
effective two-way communication between a company, the financial community and

other constituencies, which ultimately contributes to a company's securities
achieving fa ir valuation
According to this definition: IR activities cover many areas:
• Finance
• Communication
• Marketing
• Legal requirements
The foremost objective of IR is to increase the efficiency of 2-way
communication between companies and stakeholders (the most important ones are
financial communities and company shareholders).
The ultimate objective is to bring the market price of an ordinary stock to its
fair value.
According to the UK IR Society - the leading professional IR body in
Europe: ‘‘''Investor Relations is the communication o f information and insight between a
company and the investment community. This process enables a full appreciation of the
company’s business activities, strategy and prospects and allows the market to make an
informed judgement about the fair value and appropriate ownership of a company”.
According to this definition, IR is mainly the communication between
companies and financial communities.
The agreed point between this definition and the one of NIRI is that the
ultimate objective of IR is to help the market to correctly evaluate the fair valuation
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of companies and based on that evaluation, the market price of companies will be
brought to its fair value.
According to CIR1 (Canadian Investor Relations Institute): IR is defined in a
similar way to the definition of NIRI when CIRI points out that IR is the
combination of financial principles, communication and marketing to increase the
efficiency of 2-way communication channel between public companies and financial
communities to accomplish the final result of bringing a fair and efficient capital
market.

The difference between the CIRI’s and NIRI’s definition is that CIRI is more
detailed in defining the subject of IR to be public companies not companies in
general.
Almost all the stock exchanges in the world have regulations concerning the
communication between listed companies and financial communities. London Stock
Exchange (LSE) published the “Investor relations guideline fo r listed companies', in
this book, IR is defined as continual efforts of listed companies to communicate
with financial communities. Investor Relations is the combination of compulsory
and non-compulsory communication between listed companies and current
shareholders, potential investors, analysts and the media. Investor relations have
many forms: meetings with investors, press releases, annual reports, corporate
websites, etc, to stimulate the understanding of investors about the business,
corporate governance, financial outcomes and future plans of companies. It doesn’t
mean that IR is just one-way communication from companies to financial
communities, but IR is the dialogue in which companies disclose the information to
stakeholders and stakeholders receive and respond to the information.
The new aspect in this definition is that IR includes both compulsory and
non-compulsory mandate of listed companies in providing information to investor
communities as well as other audiences.
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The LSE also agrees with the above institutes that IR is the 2-way
communication channel with the purpose of increasing the mutual understanding
between listed companies and investor communities. Besides, in this definition, the
LSE begins to list some of the IR activities: meetings with investors, annual reports,
corporate websites, etc.
In the scope of this thesis, the author only focuses on the Investor Relations
of listed companies.
To summarize these above definitions, IR is the combination o f finance,
communication, marketing and laws to increase the efficiency o f the 2-way
communication between listed companies and financial communities, which is

demonstrated in the understanding o f financial communities about: corporate
business, company structure, corporate governance, company’s future plans, etc to
achieve the ultimate goal o f bringing the market price o f companies closed to its fair
value. Investor relations (IR) includes both regulatory and non-compulsory
activities.
The following chart illustrates the definition of IR activities in a listed
company:
Figure 2.1. Definition o f Investor relations
-
Finance
-
Communication
-
Marketing
- Law
z .
Increase the understanding
between companies and financial
communities:
• Corporate business
• Corporate governance
• Future plans
Market price
Fair value
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2.2. Objectives and benefits of IR
IR has 3 main objectives:
First, good liquidity and fair price fo r ordinary stocks o f listed companies in
the stock market:
Fair price of ordinary stock depends on the fair value of companies, which is

based on two elements: the current value of a company and the potential value of a
company whereas good liquidity is only defined in comparison with the liquidity of
the market and of the industry. And it is very important for a company to have good
stock liquidity to mobilize capital easily at a favorable cost of capital.
However, many companies mistakenly believe that the objectives of IR are to
make the price as high as possible and the liquidity as such as possible. In fact, the
objectives of IR are the sustainable good price and liquidity. The high price and
liquidity in a short term don’t bring benefits to the companies but can destroy the
confidence of the investor communities in the stock of the company for after
climbing to the peak, the price will fall down significantly and the liquidity will
become volatile.
Second, easy access to capital at low cost o f capital when issuing new stocks
and fixed income securities:
This can be considered the most important objective of companies when
being listed on the stock market. IR creates a 2-way communication channel
between the company and financial communities bringing the confidence of
financial communities in the company, which will be rewarded with low cost of
capital.
This purpose is considered the ultimate goal of an IR division - “IR the
strategy and practice o f the investor relations” commissoned by Nasdaq stock
market, p i 8.
Third, symmetric information:
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As defined in the first section, IR is the 2-way communication between
companies and investor communities. IR is commonly one-way communication
from companies to financial communities, but in companies with good IR activities,
companies provide enough information to financial communities, and vice versa
financial communities will become a good source of valuable information to the
BOM and BOD to manage companies in a right way.
2.3. History and evolution of IR in the world

The history of Investor relations is bonded with the establishment of publicly
traded companies. According to Britannica, the first publicly traded company was
The Dutch East India company in the 17th Century, but some other sources point out
that the first one should be Stora Kopparberg mining company in 13th Century.
Whereas the first public company in the USA was The Boston Manufacturing
Company founded in 1814. However, at this time, publicly traded companies were
very small with only a few shareholders, so their BOD didn’t pay much attention to
IR activities.
The IR profession can only be considered to have begun from 1945 and to the
present day, it has experienced three eras:
S The first era started from 1945 and finished in 1970, named the
communication era.
S The second era lasted 30 year from 1970 to 2000 and was called the
financial era.
S The third era started in 2000 and to the present day, it is the synergy
era with the combination of finance and communication.
2.3.1. The first era - the communication era
In 1945, the economic boom of the post World War II years created extra
money which could go into investment. Publically traded companies were in fierce
competition to attract this idle capital; therefore, the BOD of companies was
becoming more and more interested in communicating with investors and potential
investors, which paved the way for the development of IR activities. However, on
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those days, companies were not familiar with IR activities and the only function that
they found some similarities with is PR activities. So in some companies, which
pioneered IR activities, IR activities were assigned to the PR department. The
features of this era were that:
S Investor Relations tasks were assigned mainly to publicists who were
largely press agents and technicians who focused their job on putting the company’s
name into mass media.

S IR lacked strategic and managerial activities.
S The stream of information was just one way: companies disclosed
information to the publics mostly through mass media channels.
2.3.2. The second era - financial era
When the financial market became more highly developed, the number of
individual investors decreased whereas the number of institutional investors with
deeper financial knowledge increased significantly. So, IR activities had to adapt to
new audiences. Investor relations responsibilities were shifted from communication
specialists to accountants and financial professionals.
The features of this era were that:
• IR tasks were assigned to financial professionals (for example: CFOs),
the disclosed information was mainly financial.
• The communication channel shifted from mass media to one-on-one
meetings.
• The communication was two-way: companies gathered feedbacks
from investors and modified the message to sell the organization. The ultimate
purpose of IR activities was maximizing the stock price.
2.3.3. The third era - The synergy era
The competition for capital has become more and more fierce, so companies
have to use many ways including finance and communication skills to attract capital.
And they also realized that both communication and finance skills sets are equally
important. Moreover, there are some strategies in the previous era not suitable
anymore; for example, the strategy of aiming for as high a price as possible is not
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