Can Social Media Inform Corporate Decisions? Evidence from Merger Withdrawals

J. Anthony Cookson, Marina Niessner and Christoph M. Schiller

No 56yrj, SocArXiv from Center for Open Science

Abstract: This paper examines the role of social media in informing corporate decision-making 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 0.73 percentage point increase in the likelihood of merger withdrawal (18.9% of the baseline rate). The informativeness of social media for merger withdrawals is not explained by abnormal price reactions or news sentiment, and in fact, it is stronger when these other signals disagree. Consistent with learning from external information, we find that the social media signal is most 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.

Date: 2022-03-16
New Economics Papers: this item is included in nep-cfn, nep-com, nep-ict and nep-pay
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:56yrj

DOI: 10.31219/osf.io/56yrj

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