Investor Relations and Private Debt Markets

Prior literature documents various benefits of investor relations (IR) activities in public equity and debt markets. We study whether IR is relevant in private debt markets through public or private information channels. We find that firms with dedicated IR officers (IRO) have 7.6% (11 bps) lower spreads after controlling for common determinants of spreads and firm disclosure. The association is strongest when information asymmetry between the borrower and the lead lender is high and when there are higher levels of financial distress. Restricting the sample to only firms that have a dedicated IRO, we find that those with experienced IROs have 6.3% (8 bps) lower spreads than those with inexperienced IROs. The magnitude of the relation between IRO experience and spreads is larger for firms with a lender-focused narrative, and when the IRO shares a finance-related role within the firm. We also find that spreads increase when there is turnover in the IRO role. Our evidence suggests that the relevance of IR in private debt markets arises through both public and private information channels.