| Authors |
Cookson, Niessner, Schiller |
| Year |
2022 |
| Type |
Working Paper |
| Abstract |
This paper examines how social media informs corporate decisions by studying the decision of firm management to withdraw an announced merger. A standard deviation decline in abnormal social media sentiment following a merger announcement predicts a 0.64 percentage point increase in the likelihood of merger withdrawal (16.6% of the baseline rate). The informativeness of social media for merger withdrawals is not explained by abnormal price reactions or news sentiment. Consistent with learning from external information, we find that the social media signal is more informative after a firm adopts a corporate Twitter account, which offers a conduit for listening to investor feedback. In addition, most of the informativeness is driven by investors who reference fundamental information, not price trends, and is driven by longer tweets that likely contain investment analysis. The social media signal is also more informative for complex mergers in which analyst conference calls take a negative tone, driven by the Q&A portion of the call. Overall, these findings imply that social media is not a sideshow, but an important aspect of firm information environment. |
| Keywords |
Social media, FinTech, feedback effects, capital allocation, M&A |
| URL |
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4059633 |
| Tags |
Archival Empirical |
Asset Pricing, Trading Volume and Market Efficiency |
Manager / Firm Behavior |
Media and Textual Analysis
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