A New Era of Voluntary Disclosure? Empirical Evidence on How Employee Postings on Social Media Relate to Future Corporate Disclosures

Abstract

With the advent of social media, individual public opinions about firms can be more easily accessed and aggregated, and recent research suggests that various platforms, such as Twitter, Seeking Alpha, and Estimize, provide information relevant in predicting future corporate disclosures. Rather than focusing on the general public's opinion, we examine a public platform designed to convey insider information - Glassdoor.com, where employees voluntarily share their opinions on a number of issues, including the company's near-term business outlook. Using a sample of approximately 150,000 employee reviews, we extract both employees' explicit assessments of outlook and a measure of their latent outlook derived from factor analysis. We then examine whether the opinions employees share on social media relate to future corporate disclosures. In particular, we find evidence that employee opinions are useful in predicting growth in key income statement information, transitory reporting items (e.g., restructuring charges), earnings surprises, and management forecast news. While voluntary disclosures about firm performance have traditionally come from executives, our evidence suggests that rank-and-file employees are chipping away at upper-level management's exclusive control over that channel.

Keywords: Voluntary disclosure; social media; employee outlook; forecasting

JEL Classification: M40, M41, M12, M59