Competition and Coverage Quality on Financial Social Media

Abstract

We examine competition among content providers on the social media platform Seeking Alpha. Over time, the number of social media analysts (SMAs) on the platform has surged, increasing competition for readers' attention. We find that SMAs cover fewer earnings announcements that are covered by more competitors. Their remaining earnings announcement coverage is comprised of lower-effort content, regardless of the level of competition for coverage of a specific announcement. Earnings announcements covered by SMAs under more competitive pressure exhibit diminished aggregate coverage informativeness. Such announcements also exhibit lower stock price and trading volume responses. The results provide new insights regarding the dynamic forces shaping the equilibrium quality of information signals in financial markets.

Keywords: Social media, Competition, Information Quality, Earnings News, Seeking Alpha, Social Media Analysts

JEL Classification: G14, G41, G12