Social Media and Political Power: Their Impact on Financial Markets

41 Pages Posted: 6 Mar 2019 Last revised: 9 Apr 2019

See all articles by Riste Ichev

Riste Ichev

University of Ljubljana - Faculty of Economics

Matej Marinc

University of Ljubljana - Faculty of Economics

Nadia Massoud

Melbourne Business School, University of Melbourne

Date Written: February 14, 2019

Abstract

We investigate President Donald J. Trump’s unprecedented use of social media, notably Twitter, to attack, pressure, and compliment specific firms. Our results show that Trump is more likely to tweet firms from his business network, and firms that could help him in implementing or justifying his economic policy. Our study offers a setting for studying the impact of social media posts on the capital market when there is a change in political power. The findings provide new evidence showing that investors are more likely to react to social media posts released by an influential source; for example, the market’s reactions to Trump’s posts were significantly and economically stronger after he won the 2016 presidential election. Our results suggest that investors are very sophisticated in processing the relevance for firm value of information transmitted on social media.

Keywords: Twitter, Social Media, Political Connections, Event Study, Stock Price Reaction, Investor Sentiment

JEL Classification: G12, G14, P16

Suggested Citation

Ichev, Riste and Marinc, Matej and Massoud, Nadia, Social Media and Political Power: Their Impact on Financial Markets (February 14, 2019). Available at SSRN: https://ssrn.com/abstract=3334386 or http://dx.doi.org/10.2139/ssrn.3334386

Riste Ichev

University of Ljubljana - Faculty of Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia

Matej Marinc (Contact Author)

University of Ljubljana - Faculty of Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia

Nadia Massoud

Melbourne Business School, University of Melbourne ( email )

200 Leicester Street
Carlton, Victoria 3053 3186
Australia
+61 3 9349 8130 (Phone)
+61 3 9349 8136 (Fax)

HOME PAGE: http://mbs.edu/facultyresearch/facultydirectory/Pages/NadiaMassoud.aspx

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