Can Social Media Inform Corporate Decisions? Evidence from Merger Withdrawals

78 Pages Posted: 21 Apr 2022 Last revised: 9 Jan 2023

See all articles by J. Anthony Cookson

J. Anthony Cookson

University of Colorado at Boulder - Leeds School of Business

Marina Niessner

University of Pennsylvania - The Wharton School

Christoph Schiller

Arizona State University (ASU) - W.P. Carey School of Business

Date Written: January 9, 2023

Abstract

This paper studies whether social media sentiment can predict merger withdrawals. We find that a standard deviation increase in social media sentiment after a merger announcement is associated with a 0.64 percentage points lower probability of withdrawal (16.6% of the average). This effect is unexplained by abnormal price reactions, traditional news, and analyst recommendations. Consistent with manager learning, the informativeness of social media strengthens after firms start corporate Twitter accounts. The informativeness is driven by longer acquisition-related tweets by fundamental investors, rather than memes and price trend tweets. These findings suggest that social media signals can be important for corporate decisions.

Keywords: Social Media, FinTech, Feedback Effects, Capital Allocation, M&A

JEL Classification: F30, F36, G38, Q50

Suggested Citation

Cookson, J. Anthony and Niessner, Marina and Schiller, Christoph, Can Social Media Inform Corporate Decisions? Evidence from Merger Withdrawals (January 9, 2023). Available at SSRN: https://ssrn.com/abstract=4059633 or http://dx.doi.org/10.2139/ssrn.4059633

J. Anthony Cookson

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

Marina Niessner (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Christoph Schiller

Arizona State University (ASU) - W.P. Carey School of Business ( email )

Tempe, AZ 85287-3706
United States

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