IDEAS home Printed from https://ideas.repec.org/a/eee/riibaf/v66y2023ics0275531923001599.html
   My bibliography  Save this article

Social media, investor-company interaction and insider trading profitability: Evidence from China

Author

Listed:
  • Xie, Nan
  • Xu, Qifa
  • Jiang, Cuixia
  • Fu, Hong

Abstract

The emergence of social media enables minority shareholders to participate in corporate governance by making their voice heard. This study examines the effect of social media interaction between minority shareholders and companies on insider trading profitability. Using the “Easy interaction” platform in China, we find robust evidence that social media interaction significantly reduces the profitability of insider trades. This negative effect is stronger for firms with higher management shareholdings, poorer information environment, and less government involvement. Overall, our findings indicate that social media can play a role in corporate governance by restricting the profits of opportunistic insider trading activities.

Suggested Citation

  • Xie, Nan & Xu, Qifa & Jiang, Cuixia & Fu, Hong, 2023. "Social media, investor-company interaction and insider trading profitability: Evidence from China," Research in International Business and Finance, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:riibaf:v:66:y:2023:i:c:s0275531923001599
    DOI: 10.1016/j.ribaf.2023.102033
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0275531923001599
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ribaf.2023.102033?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hailiang Chen & Prabuddha De & Yu (Jeffrey) Hu & Byoung-Hyoun Hwang, 2014. "Wisdom of Crowds: The Value of Stock Opinions Transmitted Through Social Media," The Review of Financial Studies, Society for Financial Studies, vol. 27(5), pages 1367-1403.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Li, Wenjie & Sun, Chaojing & Li, Yan & Ertz, Myriam, 2024. "Effects of business to business e-commerce platform-governance mechanisms on seller firms’ performance," Research in International Business and Finance, Elsevier, vol. 67(PB).
    2. Fung, Michael K. & Cheng, Louis T.W. & Shen, Jianfu, 2024. "Do media message receivers asymmetrically react to non-strategic and strategic media coverage? Evidence from Hong Kong," Research in International Business and Finance, Elsevier, vol. 70(PA).
    3. Wang, Haijun & Jiao, Shuaipeng & Sun, Guanglin, 2024. "Investor interaction and the valuation of listed companies," Research in International Business and Finance, Elsevier, vol. 67(PB).
    4. Sun, Chenhe & Ji, Yinuo & Chen, Zhenyun, 2023. "Insider selling and credit spread of corporate bonds1," Finance Research Letters, Elsevier, vol. 58(PB).
    5. Zhao, Yujie & Yao, Zhanghao & Li, Yuanqin & Zhou, Ping, 2023. "Can high-quality interactions lower the cost of debt? Insights from interactive investor platforms," Finance Research Letters, Elsevier, vol. 58(PC).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Liu, Ya-Fei & Li, Hui & Liang, Sai, 2022. "Any reputation is a good reputation: influence of investor-perceived reputation in restructuring on hospitality firm performance," Annals of Tourism Research, Elsevier, vol. 92(C).
    2. Nuzzo, Simone & Morone, Andrea, 2017. "Asset markets in the lab: A literature review," Journal of Behavioral and Experimental Finance, Elsevier, vol. 13(C), pages 42-50.
    3. Chen, Cathy Yi-Hsuan & Fengler, Matthias R. & Härdle, Wolfgang Karl & Liu, Yanchu, 2022. "Media-expressed tone, option characteristics, and stock return predictability," Journal of Economic Dynamics and Control, Elsevier, vol. 134(C).
    4. Bernd Frick & Franziska Prockl, 2018. "Information Precision In Online Communities: Player Valuations On Www.Transfermarkt.De," Working Papers Dissertations 37, Paderborn University, Faculty of Business Administration and Economics.
    5. He, Xue-Zhong & Li, Kai & Santi, Caterina & Shi, Lei, 2022. "Social interaction, volatility clustering, and momentum," Journal of Economic Behavior & Organization, Elsevier, vol. 203(C), pages 125-149.
    6. Lixing Mei & Yulei Rao & Mei Wang & Jianxin Wang, 2019. "Do investors post messages differently from mobile devices? The correlation between mobile Internet messages posting and stock returns," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 66(4), pages 423-452, December.
    7. Zhiyuan Wang & Zhiqiang (Eric) Zheng & Wei Jiang & Shaojie Tang, 2021. "Blockchain‐Enabled Data Sharing in Supply Chains: Model, Operationalization, and Tutorial," Production and Operations Management, Production and Operations Management Society, vol. 30(7), pages 1965-1985, July.
    8. Obaid, Khaled & Pukthuanthong, Kuntara, 2022. "A picture is worth a thousand words: Measuring investor sentiment by combining machine learning and photos from news," Journal of Financial Economics, Elsevier, vol. 144(1), pages 273-297.
    9. Symitsi, Efthymia & Stamolampros, Panagiotis & Daskalakis, George & Korfiatis, Nikolaos, 2021. "The informational value of employee online reviews," European Journal of Operational Research, Elsevier, vol. 288(2), pages 605-619.
    10. Steven Heston & Nitish R. Sinha, 2016. "News versus Sentiment : Predicting Stock Returns from News Stories," Finance and Economics Discussion Series 2016-048, Board of Governors of the Federal Reserve System (U.S.).
    11. Cameron Truong & Thu Ha Nguyen & Thanh Huynh, 2021. "Customer satisfaction and the cost of capital," Review of Accounting Studies, Springer, vol. 26(1), pages 293-342, March.
    12. Pedersen, Lasse Heje, 2022. "Game on: Social networks and markets," Journal of Financial Economics, Elsevier, vol. 146(3), pages 1097-1119.
    13. Chen, Wenchuan & Liu, Yu & Liu, Siyi & Chen, Yugang & Zhang, Pengdong, 2024. "The governance effects of social media engagement on M&A outcomes: Evidence from China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 91(C).
    14. Xiong, Feng & Chapple, Larelle & Yin, Haiying, 2018. "The use of social media to detect corporate fraud: A case study approach," Business Horizons, Elsevier, vol. 61(4), pages 623-633.
    15. Barnes, Spencer & Cheng, Yingmei, 2023. "Employee approval of CEOs and firm value: Evidence from Employees' choice awards," Journal of Corporate Finance, Elsevier, vol. 78(C).
    16. Sun, Licheng & Najand, Mohammad & Shen, Jiancheng, 2016. "Stock return predictability and investor sentiment: A high-frequency perspective," Journal of Banking & Finance, Elsevier, vol. 73(C), pages 147-164.
    17. Bennett, Donyetta & Mekelburg, Erik & Strauss, Jack & Williams, T.H., 2024. "Unlocking the black box of sentiment and cryptocurrency: What, which, why, when and how?," Global Finance Journal, Elsevier, vol. 60(C).
    18. Domonkos F. Vamossy, 2024. "Social Media Emotions and Market Behavior," Papers 2404.03792, arXiv.org.
    19. Artem Meshcheryakov & Stoyu I Ivanov, 2017. "Investor's sentiment in predicting the Effective Federal Funds Rate," Economics Bulletin, AccessEcon, vol. 37(4), pages 2767-2796.
    20. Pablo Gomez‐Carrasco & Giovanna Michelon, 2017. "The Power of Stakeholders' Voice: The Effects of Social Media Activism on Stock Markets," Business Strategy and the Environment, Wiley Blackwell, vol. 26(6), pages 855-872, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:riibaf:v:66:y:2023:i:c:s0275531923001599. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ribaf .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.