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Do Firms’ Social Media Fake News Clarifications Mitigate the PEAD Anomaly? Evidence from a Policy Experiment in China

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  • Maobin Wang
  • Tao Ye

Abstract

Combating fake news about the stock market is a major issue in the social media era. We examine the impact of a firm’s social media fake news clarification on the PEAD using a 2010 Chinese policy experiment, which enabled firms to promptly respond to fake rumors on social media platforms. We find that a firm’s clarification of fake news on social media is negatively associated with PEAD, and its effect varies with certain dimensions of firm characteristics. Our evidence suggests that firms can play an active role in combating fake news on social media and in improving information efficiency in the stock market.

Suggested Citation

  • Maobin Wang & Tao Ye, 2023. "Do Firms’ Social Media Fake News Clarifications Mitigate the PEAD Anomaly? Evidence from a Policy Experiment in China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 59(5), pages 1281-1299, April.
    • Handle: RePEc:mes:emfitr:v:59:y:2023:i:5:p:1281-1299
    DOI: 10.1080/1540496X.2022.2128755
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