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Investigating social media as a firm’s signaling strategy through an IPO

Author

Listed:
  • Atthaphon Mumi

    (Mahasarakham University)

  • Michael Obal

    (University of Massachusetts Lowell)

  • Yi Yang

    (University of Massachusetts Lowell)

Abstract

Initial public offerings (IPOs) are a crucial step for entrepreneurial firms. Despite the growing popularity of social media among various audiences, including potential investors, limited studies have investigated how firms can utilize social media to attract financial capital during the IPO process. We utilize the signaling theory and the electronic word of mouth (eWOM) literature to shed light on this issue. Our study, based on Twitter and SDC data of 367 firms that went public in the USA from 2014 to 2015, provides evidence in support of a positive relationship between social media use by a firm and its IPO value. Furthermore, the effectiveness of a firm’s tweets is mediated by public responses to its tweets, and such effectiveness is found to be stronger for B2C firms and firms with more traditional media coverage.

Suggested Citation

  • Atthaphon Mumi & Michael Obal & Yi Yang, 2019. "Investigating social media as a firm’s signaling strategy through an IPO," Small Business Economics, Springer, vol. 53(3), pages 631-645, October.
    • Handle: RePEc:kap:sbusec:v:53:y:2019:i:3:d:10.1007_s11187-018-0066-9
    DOI: 10.1007/s11187-018-0066-9
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    4. Julian Bafera & Simon Kleinert, 2023. "Signaling Theory in Entrepreneurship Research: A Systematic Review and Research Agenda," Entrepreneurship Theory and Practice, , vol. 47(6), pages 2419-2464, November.
    5. Messeni Petruzzelli, Antonio & Mora, Luca & Natalicchio, Angelo & Platania, Federico & Toscano Hernandez, Celina, 2024. "Consumers’ reaction to sci-fi as a source of information for technological development: An empirical analysis," Technovation, Elsevier, vol. 132(C).
    6. Erica E. Harris & Daniel G. Neely & Gregory D. Saxton, 2023. "Social media, signaling, and donations: testing the financial returns on nonprofits’ social media investment," Review of Accounting Studies, Springer, vol. 28(2), pages 658-688, June.
    7. HONJO Yuji & KURIHARA Koki, 2021. "Graduation of Initial Public Offering Firms from Junior Stock Markets: Evidence from the Tokyo Stock Exchange," Discussion papers 21049, Research Institute of Economy, Trade and Industry (RIETI).

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