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Do Firms Strategically Disseminate? Evidence from Corporate Use of Social Media

59 Pages Posted: 1 Apr 2015 Last revised: 30 Jul 2017

Michael J. Jung

New York University - Leonard N. Stern School of Business

James P. Naughton

Northwestern University - Kellogg School of Management

Ahmed Tahoun

London Business School

Clare Wang

University of Iowa - Tippie College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: July 29, 2017

Abstract

We examine whether firms use social media to strategically disseminate financial information. Analyzing S&P 1500 firms’ use of Twitter to disseminate quarterly earnings announcements, we find that firms are less likely to disseminate when the news is bad and when the magnitude of the bad news is worse, consistent with strategic behavior. Furthermore, firms tend to send fewer earnings announcement tweets and “rehash” tweets when the news is bad. Cross-sectional analyses suggest incentives for strategic dissemination are higher for firms with a lower level of investor sophistication and firms with a larger social media audience. We also find that strategic dissemination behavior is detectable in high litigation risk firms but not low litigation risk firms. Finally, we find that the tweeting of bad news and the subsequent retweeting of that news by a firm’s followers are associated with more negative news articles written about the firm by the traditional media, highlighting a potential downside to Twitter dissemination.

Keywords: Strategic dissemination, strategic disclosure, social media, Twitter

JEL Classification: G14, G38, M10, M21, M41

Suggested Citation

Jung, Michael J. and Naughton, James P. and Tahoun, Ahmed and Wang, Clare, Do Firms Strategically Disseminate? Evidence from Corporate Use of Social Media (July 29, 2017). The Accounting Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2588081 or http://dx.doi.org/10.2139/ssrn.2588081

Michael J. Jung (Contact Author)

New York University - Leonard N. Stern School of Business ( email )

44 West 4th Street
New York, NY NY 10012
United States
212-998-0193 (Phone)

James P. Naughton

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Ahmed Tahoun

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

Clare Wang

University of Iowa - Tippie College of Business ( email )

108 Pappajohn Business Building
Iowa City, IA 52242-1000
United States
(319)335-1810 (Phone)

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