Corporate Use of Social Media After ESG Incidents

Abstract

Despite increasing investments in Environmental, Social, and Governance (ESG) initiatives and practices, firms often fail to meet public expectations, causing ESG incidents. While it is expected that firms may use official social media accounts to communicate with stakeholders about the incidents after the occurrences, whether and to what extent firms would also adjust their use of social media in terms of non-incident-related posts is not straightforward. The current prevailing practical advice and studies offer contradicting predictions. Using data from different sources, we construct an event-based firm-day dataset and empirically show that firms significantly increase the number of social media posts they make after ESG incidents. The impact is more salient for firms in consumer-oriented industries, where good customer relationship management is more needed. Using a semi-supervised, dictionary-based approach, we delve into the content of tweets and demonstrate that firms are inclined to increase both the number of incident-related and the number of non-incident-related tweets after an ESG incident. The follow-up analyses at the incident level indicate that the increased corporate use of social media after ESG incidents is likely beneficial. Specifically, firms that post more after an ESG incident experience a better reaction from the capital market, especially for customer-oriented firms or incidents that receive high attention from the traditional media.

Keywords: ESG incidents, ESG practices, corporate use of social media, capital market