The Economic Consequence of Social Media Usage: Evidence from the Disclosure of Consumer Product Recalls

• In Event: Disclosure and Financial Reporting

Abstract

This study examines the impact of social media usage on how the capital market and product market interpret firms’ disclosure of product recalls. Using data from Consumer Product Safety Commission (CPSC) recall disclosure, we examine the economic consequence of social media usage. From consumer product recalls issued during the period of 2012-2013, we find that (a) additional dissemination of recall information via social media is associated with negative abnormal stock returns and sales changes; (b) social media usage tend to exacerbate the negative market reactions to passive recall announcements.

Authors

• Kwangjin Lee, Michigan State University

• Soo Jeong Hong, Michigan State University

• Ginnah Lee, University of Maryland, College Park