The Impact of Social Media Message Features on Investors’ Perception of Firm Value: The Mediating Effect of Social Media Interactions

• In Event: Social Media

Abstract

We investigate the impact of anonymous social media messages on nonprofessional investors’ judgments of firm value and perceptions of management competence and trustworthiness. In a 2 x 2 x 2 between participants experiment with 68 undergraduate accounting students and 265 participants from Amazon Mechanical Turk, we investigate the joint effect of message credibility, vividness, and valence on nonprofessional investors’ investment-related decisions. We find that the influences of social media messages with higher author credibility are stronger for pallid negative news or vivid positive news. We also find that, the emotional contagion effect, as proxied by social media interaction, significantly mediates social media users’ perceptions of management competence and management trustworthiness relative to the blogger competence and blogger trustworthiness (hereafter: relative competence and relative trustworthiness). The measures of relative competence and trustworthiness, in turn, impact nonprofessional investors’ firm valuation judgments. The results extend the application of the emotional contagion effects on social media (Kramer et al. 2014) to investment-related decisions and hold implications for publicly traded companies looking to mitigate their social media exposure risk through monitoring emotionally charged posts.

Authors

• Peter Kipp, University of South Florida

• Amanuel Fekade Tadesse, University of New Orleans

• Yibo Zhang, University of South Florida