Can Social Media Interaction and Message Features Influence Nonprofessional Investors' Perceptions of Firms?

Abstract

We investigate the impact of social media messages on nonprofessional investors' assessments of management credibility and firm value. In a between-participants experiment, we examine the joint effect of social media message vividness, valence, and micro-blogger influence on nonprofessional investors' assessments of management credibility and firm value. We find that when social media messages are pallid and negative (positive), high micro-blogger influence decreases (increases) nonprofessional investors' assessments of management credibility. In contrast, the effect is absent when messages are vivid. Further, we find that the effect of micro-blogger influence on nonprofessional investors' assessments of blogger credibility and management credibility is mediated by social media interactions. The assessment of management credibility, in turn, significantly impacts nonprofessional investors' firm valuation assessment. The results have implications for regulators (SEC 2013) that may wish to update their guidance to managers on how to monitor or even control nonprofessional investors' interaction on social media platforms. Data Availability: Contact the authors.

The effect of social media on corporate violations: Evidence from Weibo posts in China

“…At the new age of information technology, social media has gradually replaced traditional media in providing source of information for investors (Wu, 2019). It promotes a dramatic change in information dissemination from a one-way mode to an interactive mode (Blankespoor et al, 2014;Kipp et al, 2019). Prior research has proved social media's role on mitigating information asymmetry as companies could utilize social media to announce corporate information (Blankespoor et al, 2014;Lee et al, 2015).…”

“…Prior research has proved social media's role on mitigating information asymmetry as companies could utilize social media to announce corporate information (Blankespoor et al, 2014;Lee et al, 2015). From the perspective of investors, Kipp et al (2019) investigate how social media affect nonprofessional investors' assessments of management credibility and firm value. Also, some studies discuss how social media such as Twitter influences stock market with regard to stock returns and trading volume (Al-Nasseri & Menla Ali, 2018;Bollen et al, 2011;Chen et al, 2014;Renault, 2017;Sprenger et al, 2014;Wu, 2019;Zhang et al, 2012).…”

“…Second, the new strand of literature on social media has mainly focused on its impact on corporate information announcement (Blankespoor et al, 2014;Lee, Hutton, & Shu, 2015), investors' perception of companies (Kipp et al, 2019) and the stock market (Al-Nasseri & Menla Ali, 2018;Bollen, Mao, & Zeng, 2011;Chen, De, Hu, & Hwang, 2014;Renault, 2017;Sprenger, Tumasjan, Sandner, & Welpe, 2014;Wu, 2019;Zhang, Fuehres, & Gloor, 2012). The present study differs from these in its focus on using Weibo posts as a direct measure of the attention of investors and further discussing the potential effects of the attention arising from social media on corporate violations in China.…”

“…With the development of the Internet and information technology in the new era, social media platforms have gradually replaced traditional media in providing source of information for investors (Wu, 2019). By using social media, the production and consumption of information is no longer an one-way mode of "producer-communicator-users," but an interactive mode in the capital market (Blankespoor, Miller, & White, 2014;Kipp, Zhang, & Tadesse, 2019). Investors can forwardly pay attention to the information released by listed companies and even make some comments on particular issues, thereby providing additional information to listed companies.…”

Instagram: Balancing Information Asymmetry of the Tourism Industry

“…A growing number of scholars addressed the role of social media in business research in different contexts, including corporate disclosure, markets' reaction and firms' valuation assessmentsee e.g., L. F. Lee, Hutton, and Shu (2015); Boylan and Boylan (2017); Debreceny, Wang, and Zhou (2019); Farkas and Keshk (2019); Kipp, Zhang, and Tadesse (2019). In this context, empirical studies document how Instagram represents a powerful and fast tool to establish and maintain a long-term corporate dialogue with stakeholders (see Annex 1).…”