Firms’ Use of Twitter and Value Creation

Faculty-development competitive research grants program for 2023-2025

Social media has increasingly become a key platform for firms to communicate with investors and other stakeholders. One of the most common social media platforms firms employ is Twitter. According to the Dartmouth Centre for Marketing Research, Twitter is the number one social media platform that companies in the US use. In 2021, Twitter had about 217 million monthly active users globally, of which 38 million were from the US. Given the growing rise of communication through social media, the SEC allowed firms to communicate material information through these platforms, consistent with the policy on the Regulation on Fair Disclosure. In this project, using a comprehensive sample of firms that use Twitter to release and disseminate corporate information, we would like to examine whether and how firms’ use of Twitter affects the price discovery process in capital markets. An answer to this question is important for several stakeholders such as regulators who may require or limit the use of social media around major corporate events, and corporate managers who are interested in reducing investor uncertainty and consequently their firms’ cost of capital. The purpose of the project is to address, using a comprehensive sample of firm-initiated tweets, whether and in which way this popular social media platform shapes the information content of stock prices around major corporate events.