Social Media Disclosure and Reputational Damage

Review of Quantitative Finance and Accounting, 2024

48 Pages Posted: 29 Nov 2023 Last revised: 22 Jan 2024

See all articles by Xing Huan

Xing Huan

EDHEC Business School

Antonio Parbonetti

University of Padua

Giulia Redigolo

ESADE Business School; affiliation not provided to SSRN

Zhewei Zhang

University of Warwick - Warwick Business School

Date Written: January 20, 2024

Abstract

We provide new evidence on the effects of social media in the context of a financial scandal using a sample of banks that were accused of manipulating the London Interbank Offered Rate (LIBOR). We find that increased bank Twitter activity when the scandal surfaced has a positive moderating effect on equity returns. However, the dissemination of content operated by social media users has a negative counterbalancing effect, thus amplifying the impact of the scandal. In particular, tweets that are unrelated to the scandal and characterized by positive sentiment contribute to exacerbating the reputational damage suffered by banks. We contribute to the emerging literature on the role of social media in capital markets.

Keywords: Disclosure, LIBOR Scandal, Operational Risk, Reputation, Social Media, Twitter

JEL Classification: G10, G14, G21, M41

Suggested Citation

Huan, Xing and Parbonetti, Antonio and Redigolo, Giulia and Redigolo, Giulia and Zhang, Zhewei, Social Media Disclosure and Reputational Damage (January 20, 2024). Review of Quantitative Finance and Accounting, 2024, Available at SSRN: https://ssrn.com/abstract=4628216

Xing Huan (Contact Author)

EDHEC Business School ( email )

393 Promenade des Anglais
Nice, Provence-Alpes-Côte d'Azu 06202
France

Antonio Parbonetti

University of Padua ( email )

Via del Santo 33
Padova, 35123
Italy
+39 049 8274261 (Phone)

Giulia Redigolo

ESADE Business School ( email )

Av. de Pedralbes, 60-62
Barcelona, 08034
Spain

affiliation not provided to SSRN

Zhewei Zhang

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

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