Financial Media

Introduction

People in the finance industry are bombarded with information from every angle. Financial media plays an important role in providing information to shareholders and potential investors. The internet, financial magazines, newspapers and others provide people with information. A study done by the Australian Investor Relations Association, found out that there are many companies today, which are using the web to distribute their annual reports. They are doing this in order to keep their shareholders informed (IR web report, 2010). This information may not be reliable. A company that is seeking to attract investors may print and distribute information that may not be genuine (Conklin, 2010, p. 25). Sometimes, the information that is provided in any of the media may be someone’s opinion rather than the real facts. The company can also deliver partial information or fail to deliver the specific information that the client may want. This in turn will provide a vague picture. The financial media strategy is an effective tool for Australian companies to influence shareholders and investors into adopting a long-term engagement with the company.

Discussion

Both shareholders and investors should make sure that they have reliable sources from which they receive information on the company. Despite communication setbacks, it is undeniable that financial media influences an investor’s decision (Argenti & MyiLibrary, 2009, p. 117). The media provides information to the shareholders and they are able to know how the company is doing. The companies use communication tools such as email to communicate to the shareholders. They also use web postings and stock exchange announcements. This ensures that shareholders have a variety of sources where they can get the company’s financial information (Marcus, 2005, p. 15). They are able to trace their investment and they are able to know their financial status in the company.

It has often been said that information is power. This statement is true in almost every area of life. When shareholders get hold of information, they are able to affect the necessary changes in the company (Brandes, 2003, p. 57). It is possible that they might have some limitations regarding what they can change. However, this should not impede them from making their voice heard on the issue. The shareholders now have their decisions heard regarding governing matters (Conklin, 2010, p. 99). Shareholders benefit from the media coverage. Companies which are covered in the media do well since their shares are not undervalued. The share price per share increases since there is a high demand (Rieves, 116). This means that the company will make more money and the shareholders will get dividends. Both the shareholders and investors have a chance to find out where the company is making investments. They are entitled to know how their funds are being used and in which companies they are making their investments (CQ Researcher, 2009, p. 109).

Mulder writes, “Reputation is one of the most highly prized assets of a company. It is also an intangible asset, difficult to capture and quantify” (Mulder, 2007, p. 213). An investor may either be local or foreign. Foreign investors are more likely to rely on the web to get the company’s financial reports (Rayburn & Hoch, 2005, p. 114). It is therefore imperative that the company provide a clear and authentic picture of their financial status. The presence of financial media has made investors more aware of the company’s financial status. This can have a negative effect, especially if the investors have an important and influential control in the company (Stuart et al., 2007, p. 69). Investors who make the decision of how the company is to be run can change their mind regarding the issue based on the opinion of someone else. They can choose to increase or decrease their investment based on something that has been printed in the financial press or that is available electronically (Kuper, 2006, p. 84). Investors need information to decide on the stocks that they want to buy. They have to know the latest news in the market regarding the company of their choice (Reddi, 2009, p. 207). This information is provided by the financial media.

There are investors who are socially conscious. For instance, a person who is concerned about environmental matters may not want to invest in a company that is responsible for degrading the environment (Jolly, 2001, p. 211). Financial media provides this potential investor with the information that he or she may need regarding this issue. This gives the potential investor a chance to choose between the investments that he feels are worthwhile to his cause. The companies are more transparent with information and this keeps the management on its toes. A potential investor is able to know the deals and the mergers that a company makes. This ensures that the investor does not invest in a company that deals with illegal activities (Groot, 2009, p. 99). On another note, financial media can influence a potential investor in a negative way. Most of them have the habit of making predictions and explaining why the market turned the way it did. They even go to the extent of explaining why the shares in a particular company did not go as expected. These predictions of doom may scare the investor away. The people who publish these details have to realize that things do not happen the same way daily (Brandes, 2003, p. 48).

Personal contacts employ social sites such as blogs, twitter and facebook to pass information. While other countries have used these sites to convey information, only a small percentage of companies in Australia have done so. Personal contacts are important because they help spread the word. A shareholder who has received financial accounts is able to share information with other shareholders (Werther & Chandler, 2010, p. 114). A company can also share information with the stakeholders. Social media helps in the process of communication.

There are several Australian companies who have interactive websites and they provide their financial reports online. Rio Tinto is one such company. It has shareholders information such as financial reports and results, shareholder services, share prices, financial data and corporate governance. Such a website is important to the shareholders. A potential investor can also find the information that he or she is looking for (Mallin, 2006, p. 95). In addition to that, he can also check the company’s past performance, the products that the company produces and other activities that the company is involved in that are not part of the primary activities (Marcus & Wallace, 158). The company has a chance to advertise itself to the investors by laying out the strategies that it intends to use in order to gain maximum profits (Rio Tinto, 2010).

Another company that publishes its financial information online is NZX markets. Just like Rio Tinto, it offers various services to its shareholders and provides information to potential clients. It also offers services that are aimed to help an investor who is just starting out and may not be familiar with the concept of buying shares (NZX, 2009). The volatility of the stock exchange market requires that on time information be provided at the right time to the investors. This is due to the unpredictable nature of stock prices (Argenti & Forman, 2002, p. 57). Performance of shares in the stock exchange market can therefore be affected by news on the company and operational changes. This therefore requires that financial information should be provided on time to aid decision making on investment.

 The NZX has integrated the financial media in giving timely communication on performance of different stocks. Australian investors have greatly benefitted from this personal contact created by the company using media coverage. By giving financial information on the performance of the New Zealand Dollar, the financial media acts as an aid in decision making on whether to invest in the stock market or to take precautionary measures of investing on a latter day. The company further simplifies financial information by using graphs and other illustrations that give a tabulated growth of shares for different financial stocks. This show the growth of securities at different times which is used to create the specific trend that the performance of the company has followed. This acts as the basis at which future ventures by the investor and the shareholder is based (Lesly, 1997, p. 164).

According to Holtz (2002, p. 83) a company’s media strategy is an important factor in developing a long-term engagement with the shareholders. The shareholders represent the most important group among the stakeholders. This group is highly sensitive of the financial performance due to their capital contribution into the company (Mallin, 2006, p. 165). Their capital on other hand acts as the primary source of finances to the company. Additionally company policies and objectives are determined by the shareholders since their input will act as the main source of company’s capital (Cornelissen, 2004, p. 129). The mutual understanding and nature of relationship between the management and the company therefore stipulate the existence of a tool that will engage the shareholders on a long term basis. The financial media strategy provides information to the shareholders on the performance of the company at different stages. By publishing periodical financial performance record on the company, the shareholders obtain information that evaluates the viability of the company (Fernadez, 2004, p. 167).

The media strategy can support the long term engagement with the shareholders by embracing disclosure of information provided to the shareholders. This is achieved by sending periodical statements on the company performance (Rakoff et all, 1993, p. 55). In Australia, this has been achieved during Annual General Meetings where shareholders are provided with financial statements in the form well published magazines that are also detailed to give in depth information on the company, its origin, capital base and objectives. Such information creates positive opinions from the shareholders (Sewing, 2010, p. 213).

The media strategy can also be adopted by publishing this financial performance information in the company website and in the newspaper dailies. This channel is aimed at ensuring that all shareholders are allowed to view the company profitability trends, ventures and objectives. According to Solomon (2007, p.197) integrating disclosure, accuracy and transparency in the media strategy, will ensure that all the shareholders become loyal and satisfied with the company operations. The media strategy gives the shareholders faith and satisfaction that company operations are done in the right manner (Groot, 2009, p. 43). Shareholders will have a tendency of developing a long term engagement with those companies that give detailed and transparent information on time through the right media channels. Disclosure of information is therefore the best channel of cultivating loyalty and trust from the shareholders who will consequently increase their shareholding in the company since their long term expectations are guaranteed (Martin et all, 2007, p. 72).

Conclusion

The importance of the financial media in developing relationships with the investors and shareholders cannot be rivaled. It is important for companies to integrate a media strategy in its operations in order to make sure that information is relayed using the right channels to all stakeholders. Recent growth in the media sectors has created additional channels that can be used to ensure that daily information is sent to the shareholders and investors (Argenti & MyiLibrary, 2009, p. 119). Embracing the electronic media has arisen as a complementary channel to the traditional publishing of company periodicals and newsletters to stakeholders.

On the other hand, different companies in Australia have embraced personal contacts as a financial media strategy. This has resulted to developing a direct contact with shareholders and investors by giving them room to comment and give views on different company policies. In order to influence the shareholders and investors into developing views and opinions that are supportive of the company’s policies, the company should use the financial media to provide timely information on the performance of the company. This is also an essential tool in developing a long engagement plan that ensures that the company is guaranteed of a capital base by the shareholders while on the other hand, the investors view the company as source of long term returns on their investments.

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