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News or Noise? The Information Content of Social Media in China

Author

Listed:
  • Femg, Xunan

    (Shanghai University of Finance and Economics)

  • Johansson, Anders C.

    (Stockholm China Economic Research Institute)

Abstract

We examine the role top executives’ social media activity plays for the stock market. When analyzing a unique data set of board chairs’ posts on Chinese social media platform Sina Weibo, we find that they are positively associated with stock returns. When we take a closer look at content, we show it is work-related content that drives stock returns. Non-work-related content has an immediate but transitory effect, suggesting that such posts grab the attention of investors but only contain noise. We also find that information asymmetry plays a significant role in the relationship between board chairs’ Weibo posts and stock returns. Also, the more followers that board chairs have on their Weibo account, the larger the effect Weibo posts have on stock returns. Furthermore, relative to state-controlled firms, Weibo posts by board chairs in private firms exhibit a significantly larger effect on stock returns. Finally, we find that a laxer regulatory environment translates into board chairs’ work-related Weibo posts having a larger effect on stock returns. Top executive social media activity thus acts as a complementary channel for firm-specific information being disseminated to the stock market.

Suggested Citation

  • Femg, Xunan & Johansson, Anders C., 2019. "News or Noise? The Information Content of Social Media in China," Stockholm School of Economics Asia Working Paper Series 2019-52, Stockholm School of Economics, Stockholm China Economic Research Institute.
    • Handle: RePEc:hhs:hascer:2019-052
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    More about this item

    Keywords

    Social Media; Microblogging; Information dissemination; Stock market; Investors; China;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative

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