Developing investor relations and strategic financial communication: Contemporary opportunities, risks, and tensions

Abstract

Researchers investigating investor relations (IR) in general and the growth of alternative finance in particular are popularising the term strategic financial communication to cover a broader remit than traditional IR territories. Despite their efforts, IR and public relations (PR) research in this area remains limited. In increasing that research, we examine five diverse equity crowdfunding (ECF) platforms in different nations to evaluate what is involved in opening up financial practices through engaging strategically with diverse communities, and through balancing risk communication. We found that despite the potential for enlarging the egalitarianism by extending participation more widely, major disparities and tensions remain. Platform businesses, caught between limited internal resources and external legal restrictions, tend to limit the investor pool; withdraw from responsibilities; perform mostly one-way communication; restrict community discussions; and bias their risk communication. These, in turn, can adversely influence risk management, especially for new and inexperienced investors and investment communities. Accordingly, we suggest how academics and professionals in IR and PR can better realise the rare combination of enlarging both economic equality and organisational profitability. We end by arguing that strategically developing financial communication through ECF in prosocial ways can enable IR and PR to contribute to the fully functioning society.