Gaming Regulation with Image-Based Tweets

41 Pages Posted: 27 Jan 2018 Last revised: 11 Mar 2019

See all articles by Nerissa C. Brown

Nerissa C. Brown

University of Illinois at Urbana-Champaign

W. Brooke Elliott

University of Illinois at Urbana-Champaign

Stephanie M. Grant

University of Washington

Date Written: March 9, 2019

Abstract

Firms are increasingly disseminating images on social media that display customized earnings measures (“non-GAAP images”). This practice falls outside the scope of mandatory disclosure rules on non-GAAP prominence in earnings releases and SEC filings. Using an experiment, we isolate this unexplored regulatory gap and investigate how non-GAAP images disseminated on social media and text-based prominence in hyperlinked earnings releases interact to influence investors’ reliance on non-GAAP earnings. Results indicate that, when the firm tweets an image featuring non-GAAP earnings, investors rely more on non-GAAP earnings even when GAAP earnings is prominent in a hyperlinked earnings release. Thus, a non-GAAP image tweet overrides the prominent placement of GAAP earnings in the earnings release. However, no such overriding effect occurs when non-GAAP earnings is tweeted in a plain text format. Supplemental experiments confirm that images operate as a distinctive prominence tool that differentially influences investors compared to traditional text-based prominence.

Keywords: Non-GAAP Earnings, Image, Social Media, Twitter, Investment Decisions

JEL Classification: G11, G40, M41

Suggested Citation

Brown, Nerissa C. and Elliott, W. Brooke and Grant, Stephanie M., Gaming Regulation with Image-Based Tweets (March 9, 2019). Available at SSRN: https://ssrn.com/abstract=3080994 or http://dx.doi.org/10.2139/ssrn.3080994

Nerissa C. Brown (Contact Author)

University of Illinois at Urbana-Champaign ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

W. Brooke Elliott

University of Illinois at Urbana-Champaign ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

Stephanie M. Grant

University of Washington ( email )

Box 353200
Seattle, WA 98195-3200
United States
(206) 543-2904 (Phone)

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