A Dubai-based management consulting firm has used machine learning algorithms to quantify the impact of investor relations on banks’ valuations.
In what it claims is a world first, Iridium Advisors used four algorithms to analyse more than 9 million data points across 673 international banks, including 655 from the Gulf Cooperation Council (GCC) region.
The algorithms, part of the Iridium Quant Lens machine learning platform developed by the firm, considered 30 different risk and return metrics in order to identify the financial and non-financial drivers of valuations.
The study found that investor relations is the third most important factor impacting the price to tangible book value of GCC banks and accounts for an average 6% swing in share price variability.
Furthermore, states Iridium, upgrading investor relations can add as much as 24% to a firm’s valuation.
“Many boards and management teams in emerging markets have not yet invested sufficiently in investor relations because they do not fully understand the value it adds,” said Oliver Schutzmann, chief executive at Iridium Advisors.
“To this background, we sought to take a scientific and systematic approach to show how the business value they create can be translated into market value, and thereby quantify the value of investor relations,” he added.
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