Does social media coverage deter firms from withholding bad news? Evidence from stock price crash risk

Chunying Wu, Xiong Xiong, Ya Gao and Jin Zhang

International Review of Financial Analysis, 2022, vol. 84, issue C

Abstract: Using a comprehensive dataset for listed companies between 2010 and 2020, we document that social media coverage can reduce managers' incentives and capabilities to withhold bad news (i.e., reduce stock price crash risk). The results remain robust in the test of solving endogenous problems. Compared with other external governance mechanisms (other media sources, external auditors, financial analysts, and institutional shareholders), social media coverage plays a complementary role in reducing stock price crash risk when there is increased monitoring by other external monitoring mechanisms. Additional tests show that social media coverage reduces crash risk when managers have greater incentives to hoard bad news.

Keywords: Social media coverage; Stock price crash risk; Informational role; Disciplinary role (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:84:y:2022:i:c:s1057521922003477

DOI: 10.1016/j.irfa.2022.102397

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