AAA Spark Meeting of Regions

The Heterogenous Corporate Use of Social Media

• In Event: FAR: Corporate use of Social Media and SAFS 161

Abstract

Prior literature finds that firms are less likely to disseminate earnings announcements on Twitter when the earnings news is unfavorable. Using daily-level data on corporate social media activity, I compare the usage of Twitter, Instagram, and Youtube upon quarterly earnings announcement dates. I find that firms indeed post more (less) upon greater magnitude of good (bad) earnings news. The magnitude, not the direction of earnings news, is consistent with the strategic posting. The effect is largest on Twitter, followed by Instagram and Youtube. This heterogeneity is presumably because Twitter incorporates text-intensive contents and investors get news feeds primarily on Twitter instead of the other two platforms. Moreover, the daily market-adjusted abnormal return upon good (bad) earnings news is higher (lower) when the firm tweets on the announcement date, suggesting that there is a significant market reward (penalty) for tweeting upon good (bad) news. I find no evidence of market reward or penalty for posting on Instagram and Youtube. Overall, findings are suggestive of the firms’ strategic use of different social media platforms upon earnings announcements.

Author

• Minjae Koo, University of Houston