The battle of social media platforms: The use of Twitter, Youtube and Instagram in corporate communication
Cass Business School, City, University of London
Can social media help firms improve the way they communicate with investors? This is the question asked in a recent paper “The battle of social media platforms: The use of Twitter, Youtube and Instagram in corporate communication” by Pawel Bilinski from Cass Business School, City, University of London. The author argues that social media communication can attract interest in a firm among competing earnings announcements leading to stronger price reaction at news announcements. This is because investors have limited resources they can devote to information acquisition and processing and social media makes it easy for them to learn about company’s results, a prediction particularly applicable to retail investors.
To test the hypothesis, the author looks at FTSE100 companies who are active users of social media. For example, 64% of FTSE 100 companies used Twitter to communicate with investors around earnings announcements over the period January 2015–April 2018. He finds that firms that post earnings results on social media enjoy higher price reactions independently of the news content. This result is stronger for firms with higher retail ownership and the author attributes it to investors perceiving social media communication as a signal of firm’s commitment to transparency. Consistently, retail ownership increases in firms that communicate earnings results through social media. Firms can credibly build reputation for transparency and openness because social media communication is costly in terms of time necessary to prepare and manage the message, and unfavourable user comments can expose the company to unwanted media or regulatory investigation.
The author also finds that if firms post earnings news on Twitter, investors react more strongly to the news content, a result that suggests Twitter posts help investors process earnings news more efficiently. YouTube videos and Instagram pictures have either negative or no effect on investors’ ability to interpret earnings news, which suggests not all social media platforms help investors interpret complex financial information revealed at earnings announcements.
Firms can “boost” the impact of social media communication by increasing the frequency of social media messages. Consistently, a higher number of Twitter and YouTube posts leads to more positive price reactions unconditionally on the news content. Higher user engagement with a tweet or an Instagram message, through reposts, comments and likes, has a similar positive effect on price reactions. These results highlight the importance of managing the message on social media.
A natural question that arises given the results found in the study is whether companies using social media to communicate corporate news are considered better investments? The author documents that analysts are more likely to upgrade a firm that communicates earnings results on Twitter in a 30-day period after earnings announcements. This result suggests that analysts perceive Twitter disclosures as an important indicator for which stocks to invest in.
About the author:
Pawel Bilinski is the Director of the Centre for Financial Analysis and Reporting Research and Course Director of the MSc in Corporate Finance at Cass Business School, City, University of London.
More information on this research is available here
Research papers by CeFARR scholars
Bingxu Fang, Ole-Kristian Hope, Zhongwei Huang, and Rucsandra Moldovan. 2020. “The Effects of MiFID II on Sell-Side Analysts, Buy-Side Analysts, and Firms.” Review of Accounting Studies, 25: 855–902. https://doi.org/10.1007/s11142-020-09545-w
Yuanyuan Liu, Zhongwei Huang, Like Jiang, and William F. Messier Jr. 2020. “Are Investors Warned by Disclosure of Conflicts of Interest? The Moderating Effect of Investment Horizon.” The Accounting Review, 95 (6): 291–310. https://doi.org/10.2308/tar-2017-0284
Lisa Baudot, Zhongwei Huang, and Dana Wallace. 2020. “Stakeholder Perceptions of Risk in Mandatory Corporate Responsibility Disclosure.” Journal of Business Ethics. https://doi.org/10.1007/s10551-020-04476-7
Tian, Hui and Yim, Andrew and Newton, David P. (2020) , Tail-Heaviness, Asymmetry, and Profitability Forecasting by Quantile Regression. Management Science, https://doi.org/10.1287/mnsc.2020.3694
Tian, Hui and Yim, Andrew and Newton, David, Tail-Heaviness, Asymmetry, and Profitability Forecasting by Quantile Regression. SRN Electronic Journal, (August 10, 2019).
Schreder, M., Bilinski, P. (2019) Idiosyncratic Information and The Expected Rate of Return: A Structural Equation Modelling Approach, Working paper.
Ge, X, Bilinski, P., Kraft, A. (2019) The Effect of Passive Ownership Concentration on Voluntary Disclosure. Working paper, Cass Business School.
Zhang, J., Bilinski, P., Raonic, I. (2019) Does Regulatory Monitoring Improve M&A Outcomes? Evidence from Chinese Comment Letters. Working paper, Cass Business School.
Bilinski, P. (2019) The battle of social media platforms: The use of Twitter, YouTube and Instagram in corporate communication. Working paper.
Bilinski, P., Cumming, D., Hass, L., Stathopoulos, K., Walker, M. (2019). Strategic Distortions in Analyst Target Prices in the Presence of Short-Term Institutional Investors. Accounting and Business Research 49(3), 305–341.
Bilinski, P., Eames, M. (2019) Earnings Quality and the Joint Issuance of Analyst Earnings and Revenue Forecasts. Journal of Business Finance & Accounting 46(1-2), 136–158.
Bilinski, P., Bradshaw, M. (2018) Analyst Dividend Forecasts and their Usefulness to Investors: International Evidence. Working paper.
Bilinski, P., Yim, A. (2018) How Accounting Firms Compete for Financial Advisory Roles in the M&A Market? Working paper.
Schreder, M., Bilinski, P. (2018) A Better Model for Estimating Implied Cost of Capital for Newly Listed Firms. Working paper.
Novak, J., Bilinski, P. (2018) Social stigma and executive compensation, Journal of Banking and Finance 96, 169-184.
David Schröder and Andrew Yim. Industry Effects in Firm and Segment Profitability Forecasting. Contemporary Accounting Research, Volume35, Issue4, Winter 2018, Pages 2106-2130.
Bilinski, P., Lyssimachou, D. (2018) Dividend Guidance to Manage Analyst Dividend Expectations. International Review of Financial Analysis 60, 53-68.
Pinheiro, T., Rivadeneyra, F. and Teignier, M. (2017), Financial Development, Credit, and Business Cycles. Journal of Money, Credit and Banking, 49: 1653–1665. doi:10.1111/jmcb.12427
Pinheiro, T and Ronen, J (2016), "Unintended Consequences of the Credit Card Act", Journal of Law, Finance, and Accounting: Vol. 1: No. 1, pp 93-138.
Bilinski, Pawel and Bradshaw, Mark Thomas. "Analyst Dividend Forecasts and Their Usefulness to Investors: International Evidence"
Bilinski, Pawel and Cumming, Douglas J. and Hass, Lars Helge and Stathopoulos, Konstantinos and Walker, Martin. "Strategic Distortions in Analyst Target Prices in the Presence of Short-Term Institutional Investors"
Bilinski, Pawel and Yim, Andrew. "Knowledge Spillover and Accounting Firms’ Competitive Strength in the M&A Advisory Market"
Jung, J., A. Kumar, S. Lim, C. Yoo. “An analyst by any other last name: Country favorability and market reaction to analyst forecasts”
Jung, J. J. Kang, S. Lim, C. Yoo. “Perceived firm trustworthiness and market underreaction to earnings news”
Jung, J. S. Lim, J. Pae, C. Yoo. “Conservatism-matching analysts and their performance”
Bilinski, P., D.Cumming, L.Hass, K.Stathopoulos, M.Walker. "Strategic distortions in analyst target prices in the presence of short-term institutional investors".
Bilinski, P., J.Novak. "Social stigma and executive remuneration: The compensation premium in "sin" industries"
Bilinski, P., J.Ohlson. "Risk vs. Anomaly: A New Methodology Applied to Accruals", The Accounting Review.
Johnston, R., Jame, R, Markov, S., Wolfe, M. "The Value of Crowdsourced Earnings Forecasts".
Johnston R, Markov, S and Gurun, U (2015 Forthcoming), "Sell-side debt analysts and debt market efficiency", Management Science
Johnston, R., Petacchi, R. "Regulatory oversight of financial reporting: Securities and Exchange Commission comment letters"
Konstantinidi T, Pope P (2015 Forthcoming), "Forecasting risk in earnings", Contemporary Accounting Research
Konstantinidi T, Kraft A, Pope P (2015 Conditionally accepted), "Asymmetric persistence and the market pricing of accruals and cash flows", Abacus
Konstantinidi T, "Investment Reversals, Accounting Conservatism and Stock Returns". Working paper.
Konstantinidi T, Penman S, Pope P. "Returns to buying risky growth". Working paper.
Raonic, I., Gietzmann M and Isidro H. "Vulture Funds and Fresh Start Accounting for Firms Emerging" from Chapter 11 Bankruptcy.
Raonic, I., and Sahin A. "Analysts’ Strategic Use of Accrual Components".
Raonic, I., and Isidro H. 2015. "The Role of Accounting for Debt Contracting after Bankruptcy".
Raonic, I., Gietzmann M and Isidro H. "Covenant Lite Bonds and the Impact of Accounting Quality".
Bilinski P (2014), "Do analysts disclose their cash flow forecasts with earnings estimates when earnings quality is low?", Journal of Business Finance and Accounting, 41, p.401-434; [Peer Reviewed]
Bilinski P., Abdulkadir Mohamed (2014 Forthcoming), "The Signaling Effect of Durations between Equity and Debt Issues", Financial Markets, Institutions, & Instruments; [Peer Reviewed]
Gietzmann M., Raonic, I. (2014), "Thinly Traded Growth Stocks: A Joint Examination of Transparency in Communication and the Trading Platform", European Accounting Review, 23(2), p.257-289
Altamuro J, Johnston, R., Pandit, S. and Zhang, H., "Operating Leases and Credit Assessments", Contemporary Accounting Research, 31(2), p.551-580
Yim A (2014), "Failure Risk and Quality Cost Management in Single versus Multiple Sourcing Decision", Decision Sciences, 45(2), p.341-354
Tan F, Yim A (2014), "Can Strategic Uncertainty Help Deter Tax Evasion? An Experiment on Auditing Rules", Journal of Economic Psychology, 40(Special Issue - February), p.161-174
Bilinski P, Danielle Lyssimachou, Martin Walker (2013), 'Target price accuracy: International evidence', The Accounting Review , 88, p.825-851; [Peer Reviewed]
Bilinski P, Norman Strong (2013), 'Managers' private information, investor underreaction and long-run SEO performance.', European Financial Management , 19(5), p.956-991; [Peer Reviewed]
Amir, E., Kallunki, J.P., Nilsson, H. (Forthcoming) "The Association between Individual Audit Partners' Risk Preferences and the Composition of their Client Portfolios", Review of Accounting Studies
Aretz, K. and Pope, P. (Forthcoming), "Common Factors in Default Risk Across Countries and Industries", European Financial Management
Bilinski P, Weimin Liu and Norman Strong (2012), "Does liquidity risk explain low firm performance following seasoned equity offerings? ", Journal of Banking and Finance, 36, p.2770-2785; [Peer Reviewed]
Clatworthy, M., Peel, D. A. and Pope, P. (2012), "Are Analysts' Loss Functions Asymmetric", Journal of Forecasting, 31(8), pp. 736-756.
Florou, A., Pope, P. (2012), "Mandatory IFRS Adoption and Institutional Investment Decisions", Accounting Review, 87(6), pp. 1993-2025.
Livne, G (2012), "Threats to Auditor Independence and Possible Remedies", Effective Auditing for Corporates (by invitation), ed. 2012 , Bloomsbury, p.41-56.
Raonic, I., Isidro, H. (2012), "Firm Incentives, Institutional Complexity and the Quality of "Harmonized" Accounting Numbers", International Journal of Accounting, 47(4), pp. 407-436.
Aretz, K. Bartram, S. M., Pope, P. (2011), 'Assymetric Loss Functions and the Rationality of Expected Stock Returns', International Journal of Forecasting, 27 (2), pp. 413-427
Carapeto, M. and Gietzmann, M. (2011), 'Sell-side Analyst Bias when Investment Banks have Privileged Access to the Board', Financial Management, Winter, 40 (3), pp. 757-784
Chen, F., Kraft, A. and Weiss, I. (2011), 'Tax Planning by Mutual Funds: Evidence from Changes in the Capital Gains Tax Rate', National Tax Journal, 64 (1), pp. 105-134
Dargenidou, C., McLeay, S. J., Raonic, I. (2011), 'Accruals, Disclosure and the Pricing of Future Earnings in the European Market', Journal of Business Finance and Accounting, 38 (5-6), pp. 473-504
Livne, G., Simpson, A. and Talmor, E. (2011), 'Do Customer Acquisition Cost, Retention and Usage Matter for Firm Performance and Valuation?', Journal of Business Finance and Accounting, 38 (3/4), pp. 334-363
Livne, G., Markarian, G. and Milne, A. (2011), 'Bankers' Compensation and Fair Value Accounting', Journal of Corporate Finance, 17 (4), pp. 1096-1115
Pope, P. and McLeay, S. J. (2011), 'The European IFRS Experiment: Objectives, Research Challenges and some Early Evidence', Accounting and Business Research (by invitation), 41 (3), pp. 233-266
Amir, E., Guan, Y. and Livne, G. (2010), "Auditor Independence and the Cost of Capital Before and After Sarbanes-Oxley: The Case of Newly Issued Public Debt", European Accounting Review, 19 (4), pp. 633-664
Aretz, K., Bartram, S. M. and Pope, P. (2010), "Macroeconomic Risks and Characteristic-based Factor Models", Journal of Banking and Finance, 34 (6), pp. 1383-1399
Pope, P. (2010), "Bridging the Gap between Accounting and Finance", British Accounting Review, 42 (2), pp. 88-102
Ashton, D., Beattie, V., Broadbent, J., Brooks, C., Draper, P., Ezzamel, M., Gwilliam, D., Hodgkinson, R., Hoskin, K. and Pope, P. (2009), 'British Research in Accounting and Finance (2001-2007): The 2008 Research Assessment Exercise', British Accounting Review, 41 (4), pp. 199-207
Espinosa, M., Gietzmann, M. and Raonic, I. (2009), 'US Institutional Investors Response to the News Flow of Intangibles Intensive European Stocks: A Study of European BioTech and Pharma Stocks', European Accounting Review, 18 (1), pp. 63-92
Livne, G. and McNichols, M. (2009), 'An Empirical Investigation of the True and Fair Override in the United Kingdom', Journal of Business Finance and Accounting, 36 (1/2), pp. 1-30
Yim, A. (2009), 'Efficient Committed Budget for Implementing Target Audit Probability for Many Inspectees', Management Science, 55 (1/2), pp. 2000-2018
Di Pietra, R., Grambovas, C., Raonic, I. and Riccaboni, A. (2008), 'The Effect of Board Size and Busy Directors on the Market Value of Italian Companies', Journal of Management and Governance, 12 (1), pp. 73-91
Florou, A. and Pope, P. (2008), 'Are Boards and Institutional Investors Active Monitors?', Managerial Auditing Journal, 23 (9), pp. 862-872
Gietzmann, M. and Ostaszewski, A. (2008), 'Value Creation with Dye's Disclosure Option: Optimal Risk Shielding with an Upper Tailed Disclosure Strategy', Review of Quantitative Finance and Accounting, 31 (1), pp. 1-27
Amir, E., Guan, Y. and Livne, G. (2007), 'The Association of R&D and Capital Expenditures with Subsequent Earnings Variability', Journal of Business Finance and Accounting, 34 (1/2), pp. 222-246
Butler, M. Kraft, A. and Weiss, I. (2007), 'The Effect of Reporting Frequency on the Timeliness of Earnings: The Cases of Voluntary and Mandatory Interim Reports', Journal of Accounting & Economics, 43 (2/3), pp. 181-217
Clatworthy, M., Peel, D. and Pope, P. (2007), 'Evaluating the Properties of Analysts' Forecasts: A Bootstrap Approach', British Accounting Review, 39 (1), pp. 1-13
Dargenidou, C., McLeay, S. and Raonic, I. (2007), 'Ownership, Investor Protection and Earnings Expectations', Journal of Business Finance and Accounting, 34 (1-2), pp.247-268
Gore, P., Pope, P. and Singh, A. (2007), 'Earnings Management and the Distribution of Earnings Relative to Targets: UK Evidence', Accounting and Business Research, 37 (2), pp. 123-150
Kraft, A., Leone, A and Wasley, C. (2007), Regression-Based Tests of the Market Pricing of Accounting Numbers: The Mishkin Test and Ordinary Least Squares', Journal of Accounting Research, 45 (5), pp. 1081-1114
Livne, G. (2007), 'Discussion of Divergence of Opinion and Post Acquisition Performance', Journal of Business Finance and Accounting, 34 (3/4), pp. 461-466
McMeeking, K., Peasnell, K. and Pope, P. (2007), 'The Effect of Large Audit Mergers on Audit Pricing in the UK', Accounting and Business Research, 37 (4), pp. 301-319
Choi, Y., O'Hanlon, J. and Pope, P. (2006), 'Conservative Accounting and Linear Information Valuation Models', Contemporary Accounting Research, 23 (1), pp. 73-102
Dargenidou, C., McLeay, S. and Raonic, I. (2006), 'Expected Earnings Growth and the Cost of Capital: An Analysis of Accounting Regime Change in the European Financial Market', Abacus, 42 (3-4), p. 291
Gietzmann, M. (2006), 'Disclosure of Timely and Forward-Looking Statements and Strategic Management of Major Institutional Ownership', Long Range Planning, 39 (4), pp. 409-427
Kraft, A., Leone, A. and Wasley, C. (2006), 'An Analysis of the Theories and Explanations Offered for the Mispricing of Accruals and Accrual Components', Journal of Accounting Research, 44 (2), pp. 297-339
Landsman, W., Peasnell, K., Pope, P. and Yeh, S. (2006), 'Which Approach to Accounting for Employee Stock Options Best Reflects Market Pricing?', Review of Accounting Studies, 11 (2/3), pp. 203-245
Landsman, W, Peasnell, K., Yeh, S. and Pope, P. (2006), 'The Value Relevance of Alternative Methods of Accounting for Employee Stock Options', Review of Accounting Studies, 11 (2-3), pp.203-245
McMeeking, K., Peasnell, K. and Pope, P. (2006), 'The Determinants of the UK Big Firm Premium', Accounting and Business Research, 36 (3), pp. 207-232
Amir, E. and Livne, G. (2005), 'Accounting, Valuation and Duration of Football Player Contracts', Journal of Business Finance and Accounting, 32 (3/4), pp. 549-586
Gietzmann, M. and Ireland, J. (2005), 'Cost of Capital, Strategic Disclosures and Accounting Choice', Journal of Business Finance and Accounting, 32 (3/4), pp. 599-634
Peasnell, K., Young, S. and Pope, P. (2005), 'Board Monitoring and Earnings Management: Do Outside Directors Influence Abnormal Accruals?', Journal of Business Finance and Accounting, 32 (7/8), pp. 1311-1346
Pope, P. (2005), 'Discussion - Accruals, Accounting-Based Valuation Models, and the Prediction of Equity Values', Journal of Accounting Auditing and Finance, 20 (4), pp. 347-354
Wang, P. and Pope, P. (2005), 'Earnings Components, Accounting Bias and Equity Valuation', Review of Accounting Studies, 10, pp. 387-40