AAA Spark Meeting of Regions

Social Media Analyst Coverage of Socially Responsible Firms

• In Event: Social Media Analyst Coverage and Investment Efficiency

Abstract

We examine the influence of firms’ commitment to corporate social responsibility (CSR) on the information dissemination behavior of social media analysts (SMAs) posting on the investment research site Seeking Alpha. We find that SMAs give greater coverage to the earnings announcements of socially responsible firms (SRFs) compared to other firms and are more likely to give coverage to good news announcements than bad news announcements. We further investigate whether this difference in coverage is due to superior disclosure practices by SRFs or to positive affective reactions by SMAs. Consistent with an affective response, we find that the sentiment in SMA articles predicts future earnings surprises less well for SRFs. We also find that SMA article tone is less responsive to earnings announcement news for socially responsible firms. Both of these results imply a reduced SMA analysis quality for SRFs. We attribute our results to SMAs’ affective reactions to socially responsible firms, or the desire for SMAs to view SRFs in a favorable light no matter what the disclosure news. Examining investors’ responses, we find some evidence that investors understand and unravel SMA biases.

Authors

• Matthew David DeAngelis, Georgia State University

• Danya Mi, Georgia State University

• James Robert Moon, Georgia Institute of Technology

• Dana Marie Wallace, University of Central Florida