Questions

1. Firms post financial tweets more often around more material accounting news events, irrespective of the direction of the news (positive or negative)
   • Testing theory: Hummel, Morgan, and Stocken (2018 Working)
2. Firms use hyperlinks more often around more material accounting news events, irrespective of the direction of the news (positive or negative)

Example firm financial tweets

Classifying tweets

Tweeting behavior intraday

Financial tweets and Financial events

Financial tweets and event direction

Financial tweets and url usage

Research Questions and hypotheses

• What drives exec adoption of Twitter?
• Do executives view Twitter as an important channel for disclosure?

Hypotheses:

1. The market responds to executive financial tweets in addition to firm tweets.
2. The market responds more weakly (strongly) to executive tweets with content similar to firm tweets.
   • Weakly: new information mechanism, the market reacts to new information content posted by executives
   • Strongly: trust mechanism, the market reacts due to stronger social bonds with individuals than firms

Example exec tweets (Business)

Example exec tweets (Other)

Tweet content over time

Executive Adoption of Twitter

Adoption is higher when younger, female, extroverted, or facing higher litigation risk. SEC’s 2013 guidance lowers adoption rate at high litigation risk firms.

Executives’ Discretionary Tweeting

Executives seem to view Twitter as an important disclosure channel

Executives Drive Stock Returns

Executives’ financial tweets lead to investor reaction beyond that of firms

Market Reaction Mechanism: Trust

\[ \scriptsize \begin{array}{l c c} \hline & \text{During trading hours} & \text{Before trading hours} \\ \text{Variable} & \left|MMR_{t}\right| & \left|MMR_{t}\right| \\ \hline \text{Fin tweets, Exec} & -0.025^{**} \\ & (-2.22) & \\ \text{Fin tweets, Exec} \times \text{Similarity} & 0.074^{**} \\ & (2.26) & \\ \text{Fin tweets, Exec} \times \text{No firm tweets} & 0.026^{**} \\ & (2.35) & \\ \text{Fin tweets, Exec} & & -0.014^{***} \\ & & (-3.17) \\ \text{Fin tweets, Exec} \times \text{Similarity} & & 0.046^{***} \\ & & (3.30) \\ \text{Fin tweets, Exec} \times \text{No firm tweets} & & 0.017^{***} \\ & & (3.41) \\ \text{Controls; Firm, Exec, Year, Month FE} & \text{Yes} & \text{Yes}\\ \hline \end{array} \]

Result is consistent with Trust driving investor reaction to exec financial tweets.

Methodology: Trust vs Information

We identify how content-wise similar each exec tweet is to corresponding firm tweets via Universal Sentence Encoder (USE).

USE is a neural network method that relies on word meaning and word order to determine sentence meanings. It does not rely on word choice.

USE example

USE abstracts away from word choice!

Reopening vs other discussion

Applications of broad measures to accounting

How does a populace’s emotion about reopening with COVID impact economic recovery?

Mask depiction and emotions

In SG, those that post pictures of people wearing masks properly exhibit ~5% less fear than those that post people without masks on (\(t=586\))

Conclusion

• From an accounting perspective…
  1. Non-traditional information sources are common to use
  2. Companies are using Twitter to great effect for informing investors
     • Symmetrically disclosing both good and bad news
  3. Executives have substantial impact when disclosing financial information on Twitter
     • Due to investors’ trust of the executives
• From a macro perspective
  • Sources of public information such as Twitter provide an interesting set of insights into the reaction of individuals

We can leverage social media to understand macro phenomena or the environment micro-econ phenomena occur in

Packages used for these slides

• dplyr
• ggplot2
• gridExtra
• kableExtra
• knitr
• revealjs