Do Firms Strategically Disseminate? Evidence from Corporate Use of Social Media

Abstract

We examine whether firms use social media to strategically disseminate financial information. Analyzing S&P 1500 firms' use of Twitter to disseminate quarterly earnings announcements, we find that firms are less likely to disseminate when the news is bad and when the magnitude of the bad news is worse, consistent with strategic behavior. Furthermore, firms tend to send fewer earnings announcement tweets and “rehash” tweets when the news is bad. Cross-sectional analyses suggest that incentives for strategic dissemination are higher for firms with a lower level of investor sophistication and firms with a larger social media audience. We also find that strategic dissemination behavior is detectable in high litigation risk firms, but not low litigation risk firms. Finally, we find that the tweeting of bad news and the subsequent retweeting of that news by a firm's followers are associated with more negative news articles written about the firm by the traditional media, highlighting a potential downside to Twitter dissemination. JEL Classifications: G14; G38; M10; M21; M41.

Facebook drives behavior of passive households in stock markets

“…Facebook can be seen as a secondary information channel compared to firsthand official company announcements published on the exchange, and companies are likely to strategically select information disseminated in Facebook (Jung et al, 2017). Nonprofit organizations and households, as arguably less sophisticated investors (Grinblatt and Keloharju, 2000), may allow their trading decision to be affected by Facebook posts and activity, especially if they have no access to professional data sources.…”

“…Moreover, less active households' decisions are related to Facebook, while the decisions of more active ones are not, which gives additional evidence that the less sophisticated the investor, the more closely related the behavior is to Facebook. Given that Facebook is not a regulated information channel compared to first-hand official exchange releases, companies are likely to strategically select what information to disseminate in Facebook (Jung et al, 2017). This suggests that less sophisticated investors, who may not have access to professional sources for financial data and news, may be driven by biased information.…”

“…Currently, Facebook is clearly the most widely used social media platform, with 2.2 billion monthly active users worldwide (Statista, 2018). As of January 2013, social media sites such as Facebook and Twitter are used by about 45% of S&P1500 firms to communicate externally formal and informal information about their business (Jung et al, 2017). Specifically, companies communicate both corporate disclosures and other information via social media (Zhou et al, 2014).…”

“…3 Additionally, communicating information via social media is voluntary, while some company announcement releases are mandatory. Furthermore, Jung et al (2017) show that companies disseminate strategically, i.e. companies are less likely to disseminate information in Twitter when the news is bad.…”

Uso Corporativo De Mídia Social E a Responsabilidade Social Corporativa

“…A escolha destas mídias sociais se justifica pela possibilidade de diferentes formas de publicação, como imagens, textos e vídeos; e interação, por meio de comentários, curtidas, compartilhamentos e retweets (Jung et al, 2018), o que consequentemente, facilita o engajamento, tornando-se, assim, canais de menor custo e adequados para o uso corporativo. Ainda segundo Manetti, Belluci e Bagnoli (2017) O procedimento de verificação da mídia social seguiu a metodologia abordada por Jung et al (2018). Primeiramente, foi realizado o acesso ao website corporativo de cada empresa para evidenciar se este possuía link que direcionasse à mídia social.…”