Can financial analysis on social media help level the playing field among investors? Evidence from Seeking Alpha

60 Pages Posted: 8 Nov 2018 Last revised: 15 Jun 2020

See all articles by Enrique Gomez

Enrique Gomez

Temple University

Frank Heflin

University of Georgia - J.M. Tull School of Accounting

James Moon

Georgia Institute of Technology - Scheller College of Business

James Warren

University of Georgia - J.M. Tull School of Accounting

Date Written: June 14, 2020

Abstract

Research suggests certain investors face significant information disadvantages, particularly during earnings announcements. We investigate whether financial analysis on Seeking Alpha, a prominent social media platform hosting original financial analysis, can mitigate this disadvantage. First, we find reduced information asymmetry and increased retail trading on days when financial analysis is posted on Seeking Alpha. Second, we find that more financial analysis on social media during the weeks before an earnings announcement attenuates earnings announcement information asymmetry. Cross-sectional evidence suggests our earnings announcement results are more pronounced for (1) analyses written by more credible authors, (2) analyses more likely relevant to evaluating the earning announcement, (3) firms operating in poorer information environments, and (4) earnings announcements occurring on busier days. Overall, our evidence suggests financial analysis on social media plays an important role in leveling the playing field among investors by reducing disclosure processing costs.

Keywords: Social Media, Information Asymmetry, Earnings Announcements

JEL Classification: M41, M21, G00, G12, O33

Suggested Citation

Gomez, Enrique and Heflin, Frank and Moon, James and Warren, James, Can financial analysis on social media help level the playing field among investors? Evidence from Seeking Alpha (June 14, 2020). Georgia Tech Scheller College of Business Research Paper No. 18-45, Available at SSRN: https://ssrn.com/abstract=3274644 or http://dx.doi.org/10.2139/ssrn.3274644

Enrique Gomez

Temple University ( email )

Philadelphia, PA 19122
United States

Frank Heflin

University of Georgia - J.M. Tull School of Accounting ( email )

Athens, GA 30602
United States
706-542-1616 (Phone)
706-542-3630 (Fax)

James Moon (Contact Author)

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

James Warren

University of Georgia - J.M. Tull School of Accounting ( email )

Athens, GA 30602
United States

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