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The unintended consequence of social media criticisms: an earnings management perspective

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  • Yi Li
  • Wei Zhang
  • Andrew Urquhart
  • Pengfei Wang

Abstract

This paper investigates the impact of social media criticisms on financial reporting quality. Analyzing data from the leading Internet stock message board in China, we demonstrate that postings on stock message boards could promote earnings management, i.e. reducing financial transparency. This finding is further enhanced by employing the instrumental variable approach and the difference-in-differences approach and is explained by the cognitive evaluation theory. Additional analysis suggests that the positive relation between social media criticisms and earnings management cannot be attributed to a deterioration in operating performance or internal governance and is more pronounced in postings from senior users.

Suggested Citation

  • Yi Li & Wei Zhang & Andrew Urquhart & Pengfei Wang, 2023. "The unintended consequence of social media criticisms: an earnings management perspective," The European Journal of Finance, Taylor & Francis Journals, vol. 29(1), pages 33-57, January.
    • Handle: RePEc:taf:eurjfi:v:29:y:2023:i:1:p:33-57
    DOI: 10.1080/1351847X.2022.2097885
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    Cited by:

    1. Zhao, Yang, 2024. "Retail shareholder activism and investment efficiency," International Review of Financial Analysis, Elsevier, vol. 93(C).

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