Determinants of Firms’ Presence on and use of Twitter: An Empirical Study

• In Event: Effects of Disclosures

Abstract

In this paper we explore the determinants of a firm’s decision to create and use a Twitter account, as well as the volume of firm’s tweets for dissemination of information and engagement with its stakeholders. We use a sample of 170,029 firm-quarters (50,439 Twitter firm-quarters), 7.64 million tweets, 38.30 million retweets, 60.92 million likes and 5.5 million followers from the primary Twitter accounts of 2,244 unique Twitter firms (from 5,906 unique public firms) between January, 2006 and December, 2017 for our analysis. This makes it the most comprehensive study, to the best of our knowledge, about firms’ use of Twitter as a medium of dissemination of information. Our results suggest that the main determinants of a firm’s decision to create a primary Twitter account are business and financial information uncertainty, customer engagement and information dissemination, peer pressure and CEO influence, market- concentration, and litigation risk. In particular, we find that firms with growth options (market-to-book), revenue volatility, loss in previous quarters, higher proportion of intangible assets, lower institutional ownership, younger CEOs, belonging to hi-tech or retail or litigation risky or higher percentage of Twitter firms’ or higher Herfindahl-Hirschman Index (higher concentration) industries are more likely to have a presence on and, also, use Twitter for dissemination of information and engagement with their followers. We also find that dissemination on Twitter and management guidance are complementary. We further find that market-to book, proportion of industry firms on Twitter, Herfindahl-Hirschman Index, loss-dummy, litigation risk, hi-tech firms, retail firms, sales, and proportion of intangible assets have a positive association whereas revenue volatility, return volatility, proportion of R&D expenses and firm’s age have a negative association with the volume of tweets by firms . Our results also suggest that firms and their followers (stakeholders) may have different incentives in engaging on Twitter as hi-tech industry firms, Herfindahl-Hirschman Index, proportion of intangible assets and institutional ownership (insignificant for firm’s volume of tweets) are negatively associated with the volume of retweets and likes by followers.

Author

• Atul Singh, George Washington University