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Retail Investors’ Perceptions of Financial Disclosures on Social Media: An Experimental Investigation Using Twitter

Sat, October 10, 7:30 to 8:30am, TBA

Abstract

Historically, financial information was disseminated via the press release. The ability to disseminate information now exists on multiple channels beyond just the press release, with each channel reaching a different audience. With the different channels of communication come different connotations and associations that people have about the channels, which may affect the interpretation of the message thereby altering management’s ability to effectively communicate with stakeholders. I investigate whether how retail investors process information is dependent upon the fit between the channel and the type of information sent on the channel. Using the Elaboration Likelihood Model I experimentally test how good and bad financial information posted on a social media channel, Twitter, compares to a more traditional channel, a company investor relations page, where financial information is historically posted. I find that Twitter is associated with investors processing financial information unconsciously on the peripheral route while conscious or central route processing is associated with information coming from the company’s website. Additionally, I find that investors have lower perceptions of management credibility after viewing financial disclosures on a company’s Twitter feed than the same disclosures on the company’s website.

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