Executive Tweets

Abstract

We explore the tweeting behavior of S&P 1500 firms’ executives (CEOs and CFOs) and its market consequences during the period of 2011 to 2018. We document that executives tweet financial information in conjunction with major events, and that investors appear to react to executive financial tweets in addition to firm financial tweets. The market reaction is associated with an increase in retail trading activity. Using an innovative machine learning-based construct measuring the content similarity between executive tweets and firm tweets, we examine whether the market reaction derives from new information in the financial tweets or a change in the perceived credibility of the information. We find that investors react more positively to financial tweets from executives that are more content-wise similar to information already posted by firm Twitter accounts, consistent with an increase in perceived credibility driving the reaction. In addition, we document that the market reacts to information content in financial tweets by executives in the absence of firm disclosure, providing support for the new information mechanism as well.

Keywords: Social media,executives,dissemination,Twitter

JEL Classification: G14, M12, M15, M40