Social Media, Bank Relationships and Firm Value

Chia-Hui Chao and Hai-Chin Yu

Chapter 66 in Handbook of Financial Econometrics, Mathematics, Statistics, and Machine Learning:(In 4 Volumes), 2020, pp 2337-2371 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This study examines how a firm’s usage of social media and banking relationships influence its value. Using a sample of 6,636 year-firm observations from 2008 to 2015, the results show that social media (Facebook, Google+, and LinkedIn) positively influence firm value, whereas bank relationships affect firm value differently: the high number of banks a firm borrows from reducing value, whereas the high bank debt a firm using creates value. The impacts of YouTube and Twitter on firm value are insignificant. Although social media have a similar function as banks in mitigating the information asymmetry between firms and outsiders, the information types vary. Banks create more soft and private information, while social media deliver more public and hard information. The accuracy of information is more than the quantity; hence, whether more information sharing via social media creates value is uncertain. We also find the substitution and complementary effects between various types of social media and banking relationships on firm value. Our results remain robust after conducting a difference-in-differences (DID) analysis using the exogenous shock of the Facebook IPO in 2012.

Keywords: Financial Econometrics; Financial Mathematics; Financial Statistics; Financial Technology; Machine Learning; Covariance Regression; Cluster Effect; Option Bound; Dynamic Capital Budgeting; Big Data (search for similar items in EconPapers)
JEL-codes: C01 C1 G32 (search for similar items in EconPapers)
Date: 2020
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