Social Media, Bank Relationships and Firm Value

Handbook of Financial Econometrics, Mathematics, Statistics, and Machine Learning, Chapter 66, ed. by Cheng-Few Lee, World Scientific Publishing Co. Ltd. ISBN: 978-981-12-0238-4

Posted: 6 May 2020

See all articles by Chia-Hui Chao

Chia-Hui Chao

Hsing Wu University

Hai-Chin Yu

Chung Yuan Christian University

Date Written: April 10, 2020

Abstract

This study examines how a firm’s usage of social media and banking relationships influence its value. Using a sample of 6,636 year-firm observations from 2008 to 2015, the results show that social media (Facebook, Google+, and LinkedIn) positively influence firm value, whereas bank relationships affect firm value differently: the high number of banks a firm borrows from reducing value, whereas the high bank debt a firm using creates value. The impacts of YouTube and Twitter on firm value are insignificant. Although social media has a similar function as banks in mitigating the information asymmetry between firms and outsiders, the information types vary. Banks create more soft and private information, while social media deliver more public and hard information. The accuracy of information is more than the quantity; hence, whether more information sharing via social media creates value is uncertain. We also find the substitution and complementary effects between various types of social media and banking relationships on firm value. Our results remain robust after conducting a difference-in-differences ( DID) analysis using the exogenous shock of the Facebook IPO in 2012.

Keywords: Social Media, Facebook, Bank Relationships, Firm Value

JEL Classification: G21, G23, G38

Suggested Citation

Chao, Chia-Hui and Yu, Hai-Chin, Social Media, Bank Relationships and Firm Value (April 10, 2020). Handbook of Financial Econometrics, Mathematics, Statistics, and Machine Learning, Chapter 66, ed. by Cheng-Few Lee, World Scientific Publishing Co. Ltd. ISBN: 978-981-12-0238-4, Available at SSRN: https://ssrn.com/abstract=3572563

Chia-Hui Chao (Contact Author)

Hsing Wu University ( email )

New Taipei City
Taiwan

Hai-Chin Yu

Chung Yuan Christian University ( email )

22 Pu-Jen,Pu-chung Li
Chung-Li, Taiwan 32023
Taiwan
886 3 265 5209 (Phone)
886 3 265 5299 (Fax)

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