The Challenges of Investor Communication: The Case of Cuc International, Inc
Posted: 23 May 1998
Date Written: June 1994
We examine investor communication issues faced by public corporations using the experience of CUC International. CUC had difficulty convincing investors that its new product marketing outlays were profitable investments, leading to stock mis-valution over an extended period. To resolve this problem, it adopted a series of accounting and financial policy measures, including a leveraged recapitalization, accelerated debt repayments, and a stock repurchase. CUC's experience suggests that accounting is not always effective in facilitating credible and timely communication. While financial signals are more effective, their impact is not as immediate as predicted by prior research. The CUC case suggests that investor communications is a rich area for future research.
JEL Classification: G24, M10, M40
Suggested Citation: Suggested Citation