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Social media disclosure and reputational damage

Author

Listed:
  • Xing Huan

    (EDHEC Business School)

  • Antonio Parbonetti

    (University of Padova)

  • Giulia Redigolo

    (Ramon Llull University)

  • Zhewei Zhang

    (University of Warwick)

Abstract

We provide new evidence on the effects of social media in the context of a financial scandal using a sample of banks that were accused of manipulating the London Interbank Offered Rate (LIBOR). We find that increased bank Twitter activity when the scandal surfaced has a positive moderating effect on equity returns. However, the dissemination of content operated by social media users has a negative counterbalancing effect, thus amplifying the impact of the scandal. In particular, tweets that are unrelated to the scandal and characterized by positive sentiment contribute to exacerbating the reputational damage suffered by banks. We contribute to the emerging literature on the role of social media in capital markets.

Suggested Citation

  • Xing Huan & Antonio Parbonetti & Giulia Redigolo & Zhewei Zhang, 2024. "Social media disclosure and reputational damage," Review of Quantitative Finance and Accounting, Springer, vol. 62(4), pages 1355-1396, May.
    • Handle: RePEc:kap:rqfnac:v:62:y:2024:i:4:d:10.1007_s11156-023-01239-z
    DOI: 10.1007/s11156-023-01239-z
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    More about this item

    Keywords

    Disclosure; LIBOR scandal; Operational risk; Reputation; Social media; Twitter;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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