The Role of Social Media in the Corporate Bond Market: Evidence from Twitter

59 Pages Posted: 31 Oct 2022

See all articles by Eli Bartov

Eli Bartov

NYU Stern School of Business

Lucile Faurel

Arizona State University

Partha S. Mohanram

Rotman School of Management, University of Toronto

Multiple version iconThere are 2 versions of this paper

Date Written: October 23, 2022

Abstract

Prior studies document the role social media information plays in the stock market as well as the important dissimilarities between the bond and stock markets. Bridging these two literatures, we examine the role of social media information in the corporate bond market. Analyzing a broad sample of messages by Twitter individual users, posted just prior to earnings announcements, containing bond, credit risk, and fundamental information, we find that aggregate Twitter opinion (OPI) predicts upcoming announcement bond returns and changes in CDS spreads, and is associated with future changes in bond yield spreads and credit ratings, thereby providing economically important information to the bond market. This interpretation is bolstered by results from a variety of cross-sectional analyses. Finally, we document an association between OPI and future changes in default risk, which casts light on the nature of the Twitter information underlying our findings. Overall, our findings demonstrate that Twitter appears to disseminate potentially economically important information to even the presumably sophisticated bond and CDS investors, as well as information intermediaries.

Keywords: Twitter, social media, credit risk, default risk, bankruptcy risk, earnings, CDS, bond yield, bond returns

JEL Classification: M41, G14

Suggested Citation

Bartov, Eli and Faurel, Lucile and Mohanram, Partha S., The Role of Social Media in the Corporate Bond Market: Evidence from Twitter (October 23, 2022). Management Science, Rotman School of Management Working Paper No. 4255991, Available at SSRN: https://ssrn.com/abstract=4255991

Eli Bartov

NYU Stern School of Business ( email )

44 W. 4th Street, Suite 10-96
New York, NY 10012
United States
212.998.0016 (Phone)

Lucile Faurel (Contact Author)

Arizona State University ( email )

W.P. Carey School of Business
School of Accountancy, B267H
Tempe, AZ 85287
United States

Partha S. Mohanram

Rotman School of Management, University of Toronto ( email )

Canada

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