Determiners of internet financial communication: Evidence from AIM Italia

Our paper studies the firms quoted on the Alternative Investment Market (AIM) Italia. This unregulated market created 1 March 2012 is devoted to small and medium sized firms (SMEs). Thanks to the more flexible procedure to listing through AIM Italia, Italian SMEs have an efficient means to reach investors focused on small caps and raise capital.

The goal of this paper is to highlight the determinants of the internet financial communication level. First we use an analysis grid of websites to evaluate the level of internet financial communication. For each item of the grid (annual report, stock price, dividend, shareholder structure, etc.) available on the firms’ website we give one point. So we have an internet financial communication score for each firm.

Second we use linear regression to discover the determinants of the financial communication level. In our econometric model the score is the dependent variable and the explanatory variables are coming from the literature review.

Our results show that the size of the firm, approached by the market capitalization, has a positive effect on the financial communication score and is statistically significant at p<0.01. It means that bigger firms have a higher level of internet financial communication, as established by many other studies.

We find that membership in the IT sector also has a positive impact on the score. The coefficient of this variable appears to be statistically significant at p<0.01. So a company in the IT sector will tend to communicate more financial information on the internet than others.

Performance of the firm, measured by return of assets (ROA) and return of equity (ROE), has a negative effect on the internet financial communication level. This could mean that firms with higher level of performance has a lower level of internet financial communication. Finally we find that debt and capital dispersion are non-significant variables.

JEL: M15, G10, C50, O32. 

Keywords: financial communication - websites analyses - internet - unregulated financial markets - AIM Italia - SME.