Information Asymmetry and Share Prices: Analysis of the Use of Social Networks in the Brazilian and U.S. Capital Markets

Revista de Contabilidade e Finanças – USP, São Paulo, v. 26, n. 69, p. 317-330, 2015

14 Pages Posted: 23 Dec 2015

See all articles by Marcelo Arruda

Marcelo Arruda

UFPB

Luiz Felipe de Araújo Pontes Girão

Federal University of Paraiba (UFPB)

Wenner Glaucio Lucena

Federal University of Paraíba - UFPB

Date Written: December 22, 2015

Abstract

Increasing globalization has meant the internet becoming ever more part of the routine of people around the world. With the evolution of the internet, social networks have emerged in order to facilitate communication between people, communities and even between corporations. Social networks offer companies a way of instantly releasing information, allowing those who use this information greater flexibility when searching for news about the companies in which they have invested or wish to invest. In this context, the objective of this study was to analyze how social networks (Facebook, Twitter and Youtube) affect levels of information asymmetry and the pricing of shares for Brazilian and U.S. public companies during 2012. To achieve the proposed goal, the conceptual framework of the Ohlson model (1995) was used to verify whether the information posted on social networks affects the pricing of shares, and share price volatility was used as a proxy for information asymmetry. The sample included 170 Brazilian companies listed on the BM&FBOVESPA and 100 companies listed on the U.S. stock market in 2012. The results show that social networks can affect levels of information asymmetry in these markets, but only "unofficial" Facebook affects the pricing of shares for companies in the Brazilian stock market, although sensitivity analysis indicated that the groups that use and those that do not use Facebook do not exhibit different average returns. Thus, investors should not use this information to devise strategies to generate better returns.

Keywords: social networks, information asymmetry, pricing of shares

JEL Classification: c91, d40, G12, G14, G39, K22, K42, N26, N46

Suggested Citation

Arruda, Marcelo and Pontes Girão, Luiz Felipe de Araújo and Lucena, Wenner Glaucio, Information Asymmetry and Share Prices: Analysis of the Use of Social Networks in the Brazilian and U.S. Capital Markets (December 22, 2015). Revista de Contabilidade e Finanças – USP, São Paulo, v. 26, n. 69, p. 317-330, 2015. Available at SSRN: https://ssrn.com/abstract=2707637

Marcelo Arruda

UFPB ( email )

Cidade Universitária
s/n - Castelo Branco III
João Pessoa, Paraíba 58051-900
Brazil

Luiz Felipe de Araújo Pontes Girão (Contact Author)

Federal University of Paraiba (UFPB) ( email )

Cidade Universitária
s/n - Castelo Branco III
João Pessoa, Paraiba 58297-000
Brazil

Wenner Glaucio Lucena

Federal University of Paraíba - UFPB ( email )

Cidade Universitária
s/n - Castelo Branco III
João Pessoa, Paraiba
Brazil
558332167456 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
39
Abstract Views
425
PlumX Metrics