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The attenuation effect of social media: Evidence from acquisitions by large firms

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  • Mazboudi, Mohamad
  • Khalil, Samer

Abstract

We examine the role of social media in firm acquisitions. Twitter utilizes the “push” technology that allows firms to reduce information asymmetry by disseminating news to a broader set of investors in a timely manner. Using hand collected acquisition announcements from Twitter covering the period from 2009 to 2012, we find that the acquirer size is a main determinant of disclosing acquisition announcements on Twitter. Large acquirers announce their acquisitions on Twitter and, as a result, are able to attenuate the anticipated negative market reaction at acquisition announcement. We find no evidence that the attenuation effect of announcing acquisitions on Twitter subsequently reverses or that announcing acquisitions on Twitter is positively associated with pre-announcement earnings management. Overall, our results suggest that Twitter has become an important investor relation channel for major corporate events such as acquisition announcements and that large acquirers can use this new channel to enhance stability in their stock prices.

Suggested Citation

  • Mazboudi, Mohamad & Khalil, Samer, 2017. "The attenuation effect of social media: Evidence from acquisitions by large firms," Journal of Financial Stability, Elsevier, vol. 28(C), pages 115-124.
    • Handle: RePEc:eee:finsta:v:28:y:2017:i:c:p:115-124
    DOI: 10.1016/j.jfs.2016.11.010
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    4. Wang, Qiping & Yiu Keung Lau, Raymond, 2024. "Social mood and M&A performance: An empirical investigation enhanced by multimodal analytics," Journal of Business Research, Elsevier, vol. 176(C).
    5. Ahmed Ayman & Moataz El-Helaly & Nermeen Shehata, 2019. "Board diversity and earnings news dissemination on Twitter in the UK," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 23(3), pages 715-734, September.
    6. Li, Qian & Wang, Jiamin & Bao, Liang, 2018. "Do institutions trade ahead of false news? Evidence from an emerging market," Journal of Financial Stability, Elsevier, vol. 36(C), pages 98-113.
    7. Jawad Saleemi, 2023. "Economic Unrest and Investment Perspective on Liquidity in relation to the Investor Sentiments," Financial Economics Letters, Anser Press, vol. 2(2), pages 48-57, November.
    8. Wang, Qiping & Lau, Raymond Yiu Keung & Xie, Haoran, 2021. "The impact of social executives on firms’ mergers and acquisitions strategies: A difference-in-differences analysis," Journal of Business Research, Elsevier, vol. 123(C), pages 343-354.
    9. Bizzi, Lorenzo & Labban, Alice, 2019. "The double-edged impact of social media on online trading: Opportunities, threats, and recommendations for organizations," Business Horizons, Elsevier, vol. 62(4), pages 509-519.
    10. Christophe J. GODLEWSKI & Katarzyna BYRKA-KITA & Renata GOLA & Jacek CYPRYJANSKI, 2022. "Silence is not golden anymore? Social media activity and stock market valuation in Europe," Working Papers of LaRGE Research Center 2022-04, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    11. Chen, Xiaoqi & Gong, Xu & Yang, Zhonghuang, 2021. "Media report favoritism and consequences: A comparison of traditional and new energy sector," Energy Economics, Elsevier, vol. 104(C).
    12. Mohammed S. Albarrak & Ngan Duong Cao & Aly Salama & Abdullah A. Aljughaiman, 2023. "Twitter carbon information and cost of equity: the moderating role of environmental performance," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 13(3), pages 693-718, September.

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    More about this item

    Keywords

    Acquisitions; Social media; Twitter; Information asymmetry; Disclosure; Stock price stability;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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