The Effect of Social Media Trending on Traditional Media Coverage

Abstract

We examine whether social media activities affect traditional media coverage. Focusing on abnormally high volumes of discussion about firms around their earnings announcements (i.e., social media trending), we find that traditional media outlets are more likely to cover earnings announcements that are experiencing social media trending. The effect is more pronounced when social media trending is more sensational or less informative and when financial journalists at traditional media outlets actively use social media. However, the effect is weaker when financial journalists are busier. Taken together, these results suggest that traditional media strategically leverages social media to cater to its readers’ interests and provide more informative coverage to complement social media. Additional tests find that traditional media coverage that has the same tone as trending social media discussion increases firms’ stock liquidity around earnings announcements.

Keywords: earnings announcements, social media, social media trending, traditional media

JEL Classification: G14, L82, M40, M41