Negative News and Investor Trust: The Role of $Firm and #CEO Twitter Use

Posted: 23 May 2019

See all articles by W. Brooke Elliott

W. Brooke Elliott

University of Illinois at Urbana-Champaign

Stephanie M. Grant

University of Washington

Frank D. Hodge

University of Washington - Michael G. Foster School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: December 1, 2018

Abstract

We examine how CEOs can facilitate the development of investor trust that helps mitigate the effects of negative information. Results from an experiment show that investors trust the CEO more and are more willing to invest in the firm when the CEO communicates firm news followed by a negative earnings surprise through a personal Twitter account than when the news and surprise comes from the CEO via a website or from the firm's Investor Relations Twitter account or website. A follow‐up experiment shows that repeating the negative news does not incrementally affect investors who received the news from the CEO's Twitter account, but does further negatively impact investors who received the news via other disclosure mediums, especially those who received the news via the Investor Relations Twitter account. Our results have implications for firms and executives considering the costs and benefits of communicating with investors via Twitter.

Keywords: social media; Twitter; social bond; trust; investment decisions;negative earnings surprise; repeated information

JEL Classification: G11; G40; M41

Suggested Citation

Elliott, W. Brooke and Grant, Stephanie M. and Hodge, Frank Douglas, Negative News and Investor Trust: The Role of $Firm and #CEO Twitter Use (December 1, 2018). Journal of Accounting Research, Vol. 56, No. 5, 2018. Available at SSRN: https://ssrn.com/abstract=3378151

W. Brooke Elliott (Contact Author)

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)

Frank Douglas Hodge

University of Washington - Michael G. Foster School of Business ( email )

Paccar Hall 540, Box 353200
Seattle, WA 98195-3200
United States
206-616-8598 (Phone)
206-685-9392 (Fax)

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