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Corporate social media: How two-way disclosure channels influence investors

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  • Cade, Nicole L.

Abstract

I examine how firm-investor communications on social media affect investors' perceptions of the firm. I focus on a case in which a Twitter user criticizes a discretionary accrual adjustment and management chooses whether and how to respond. I collect data using multiple experiments in which I vary the perceived validity of a criticism via the number of retweets it receives and/or the firm's response. Results suggest that the influence the criticism has on nonprofessional investors' perceptions depends on the number of times it has been retweeted. Results also suggest that following a criticism perceived to be valid, there are benefits of addressing the criticism directly or of redirecting attention to a positive highlight from the firm disclosure (relative to not responding). The findings advance our understanding of how a firm can effectively manage investors' perceptions by participating in, rather than abstaining from, conversations about the firm on social media.

Suggested Citation

  • Cade, Nicole L., 2018. "Corporate social media: How two-way disclosure channels influence investors," Accounting, Organizations and Society, Elsevier, vol. 68, pages 63-79.
    • Handle: RePEc:eee:aosoci:v:68-69:y:2018:i::p:63-79
    DOI: 10.1016/j.aos.2018.03.004
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