Financial Returns to Firms’ Communication Actions on Firm-Initiated Social Media: Evidence from Facebook Business Pages

Forthcoming at Information Systems Research

55 Pages Posted: 12 Jun 2014 Last revised: 26 Aug 2019

See all articles by Sunghun Chung

Sunghun Chung

Santa Clara University - Leavey School of Business

Animesh Animesh

McGill University

Kunsoo Han

McGill University

Alain Pinsonneault

McGill University - Desautels Faculty of Management

Date Written: August 2, 2019

Abstract

The primary goal of this study is to investigate the financial returns to firms’ communication actions on a firm-initiated social media platform by focusing on Facebook Business pages. To this end, we conceptualize and quantify two types of firms’ communication actions on social media: posts and responses to customer messages. Further, we classify a firm’s responses to customer messages based on the valence of customer messages – positive vs. negative – and examine the effects of volume as well as timeliness of the two types of a firm’s responses to customer messages on firm performance. Using a sample of 63 South Korean firms across industries over a three-year period (5,566 firm-week observations), we find that the volume and timeliness of a firm’s responses to negative customer messages, which are associated with an increase in customer satisfaction, have a significant positive impact on the firm’s market performance, measured by abnormal returns and Tobin’s q. Interestingly, the results suggest that a firm’s posts and its responses to positive customer messages are not significantly associated with firm performance. Further, we find that a firm’s posts and its responses to negative customer messages exhibit complementarities in contributing to firm performance. Our results are robust to various alternative specifications, econometric concerns, and Facebook’s policy changes such as EdgeRank and Promoted Post. Our findings underscore the business value of firms’ actions on social media and provide unique and important implications for theory and practice regarding the appropriate ways to use social media for building and managing customer relationships.

Keywords: social media, firm’s social media actions, firm-generated content, firm-owned social media, firm posts, firm responses to customers, firm performance, abnormal returns, Tobin’s q, content analysis, sentiment analysis

JEL Classification: M31, L15, C33

Suggested Citation

Chung, Sunghun and Animesh, Animesh and Han, Kunsoo and Pinsonneault, Alain, Financial Returns to Firms’ Communication Actions on Firm-Initiated Social Media: Evidence from Facebook Business Pages (August 2, 2019). Forthcoming at Information Systems Research, Available at SSRN: https://ssrn.com/abstract=2448510 or http://dx.doi.org/10.2139/ssrn.2448510

Sunghun Chung (Contact Author)

Santa Clara University - Leavey School of Business ( email )

500 El Camino Real
Santa Clara, CA California 95053
United States

Animesh Animesh

McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada

Kunsoo Han

McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada

Alain Pinsonneault

McGill University - Desautels Faculty of Management ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1
Canada

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