Gaming Regulation with Image-Based Tweets
41 Pages Posted: 27 Jan 2018 Last revised: 11 Mar 2019
Date Written: March 9, 2019
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: Suggested Citation