The Emergence of "Social Executives" and Its Consequences for Financial Markets

59 Pages Posted: 31 Aug 2013 Last revised: 13 Jul 2018

Hailiang Chen

City University of Hong Kong - Department of Information Systems

Byoung-Hyoun Hwang

Cornell University - Dyson School of Applied Economics and Management; Korea University - Department of Finance

Baixiao Liu

Florida State University

Date Written: May 23, 2018

Abstract

We document the emergence of “social executives,” top executives who connect with investors directly, personally, and in real time through social media, and we study the consequences of this development for financial markets. We contend that the emergence of social executives enables retail investors to obtain value-relevant information to which they previously had no access. Social executives also grab investor attention. Building on the finance market microstructure literature, we argue that both improving access to value-relevant information and attracting investor attention help widen a firm’s retail investor base and improve stock market liquidity. Using data reflecting the personal Twitter account activity of the CEOs and CFOs of the largest publicly traded companies in the United States, we find evidence consistent with our argument. Utilizing the Securities and Exchange Commission’s recent embrace of social media as a plausibly exogenous shock, we also provide evidence for a causal link. We conclude that the emergence of social executives has important consequences for financial markets.

Keywords: Social executives, Social Media, Retail Investors, Stock Markets

JEL Classification: G12, G14, G38, M41, M48

Suggested Citation

Chen, Hailiang and Hwang, Byoung-Hyoun and Liu, Baixiao, The Emergence of "Social Executives" and Its Consequences for Financial Markets (May 23, 2018). Available at SSRN: https://ssrn.com/abstract=2318094 or http://dx.doi.org/10.2139/ssrn.2318094

Hailiang Chen

City University of Hong Kong - Department of Information Systems ( email )

Kowloon Tong
Hong Kong

HOME PAGE: http://www.cb.cityu.edu.hk/staff/hailchen/

Byoung-Hyoun Hwang (Contact Author)

Cornell University - Dyson School of Applied Economics and Management ( email )

Ithaca, NY
United States

HOME PAGE: http://www.bhwang.com

Korea University - Department of Finance

Seoul, 136-701
United States

Baixiao Liu

Florida State University ( email )

Tallahasse, FL 32306
United States

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