How Facebook influences non-professional investors’ affective reactions and judgments

Maia Farkas and Walied Keshk

Journal of Financial Reporting and Accounting, 2019, vol. 17, issue 1, 80-103

Abstract: Purpose - The use of social networking websites by companies to disclose corporate news and by investors to collect information for investment purposes is increasing rapidly. However, the role of investors’ affective reactions to corporate disclosures on social networking websites is under-researched. This paper aims to examine how the disclosure platform (disclosing news on a company’s Facebook Web page or the corporate investor relations Web page) and news valence (positive or negative) jointly influence investors’ affective reactions to corporate news and stock price change judgments. Design/methodology/approach - The authors conduct an experimental study using 364 participants from Amazon’s Mechanical Turk website as a proxy for reasonably informed investors. Findings - Results show that the disclosure platform influences investors’ affective reactions and stock price change judgments when the corporate news is negative, but not when the corporate news is positive. In addition, investors’ affective reactions mediate the influence of the disclosure platform on investors’ stock price change judgments when the corporate news is negative rather than positive. Originality/value - This paper extends the theory on affective reactions to a social networking context by showing that differences in disclosure platforms and news valence influence investors’ affective reactions to corporate news. In addition, the study’s theory and findings have significant implications for researchers, company managers and public relations specialists, capital market participants, regulators and investor education organizations and users of social networking websites.

Keywords: Facebook; Investors; Affective reactions; News valence (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfrapp:jfra-10-2017-0092

DOI: 10.1108/JFRA-10-2017-0092

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