Investigating social media as a firm’s signaling strategy through an IPO

Atthaphon Mumi (), Michael Obal () and Yi Yang ()
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Atthaphon Mumi: Mahasarakham University
Michael Obal: University of Massachusetts Lowell
Yi Yang: University of Massachusetts Lowell

Small Business Economics, 2019, vol. 53, issue 3, No 6, 645 pages

Abstract: Abstract Initial public offerings (IPOs) are a crucial step for entrepreneurial firms. Despite the growing popularity of social media among various audiences, including potential investors, limited studies have investigated how firms can utilize social media to attract financial capital during the IPO process. We utilize the signaling theory and the electronic word of mouth (eWOM) literature to shed light on this issue. Our study, based on Twitter and SDC data of 367 firms that went public in the USA from 2014 to 2015, provides evidence in support of a positive relationship between social media use by a firm and its IPO value. Furthermore, the effectiveness of a firm’s tweets is mediated by public responses to its tweets, and such effectiveness is found to be stronger for B2C firms and firms with more traditional media coverage.

Keywords: Social media; Initial public offering; Signaling theory; Word of mouth; Twitter; B2C; G14; L26; M13; M30 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (8)

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DOI: 10.1007/s11187-018-0066-9

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