Negative News and Investor Trust: The Role of $Firm and #CEO Twitter Use

W. Brooke Elliott; Stephanie M. Grant; Frank Douglas Hodge

doi:10.2139/ssrn.2612444

Negative News and Investor Trust: The Role of $Firm and #CEO Twitter Use

W. Brooke Elliott, Stephanie M. Grant, Frank Douglas Hodge

Accountancy

Research output: Working paper

Abstract

We examine how CEOs can facilitate the development of investor trust that helps mitigate the effects of negative information. Results from an experiment show that investors trust the CEO more and are more willing to invest in the firm when the CEO communicates firm news followed by a negative earnings surprise through a personal Twitter account than when the news and surprise comes from the CEO via a website or from the firm’s Investor Relations Twitter account or website. A follow-up experiment shows that repeating the negative news does not incrementally affect investors who received the news from the CEO’s Twitter account, but does further negatively impact investors who received the news via other disclosure mediums, especially those who received the news via the Investor Relations Twitter account. Our results have implications for firms and executives considering the costs and benefits of communicating with investors via Twitter.

Original language	English (US)
Number of pages	59
DOIs	https://doi.org/10.2139/ssrn.2612444
State	Published - May 31 2015

Keywords

social media
Twitter
social bond
trust
investment decisions
negative earnings surprise
repeated information

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10.2139/ssrn.2612444

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title = "Negative News and Investor Trust: The Role of $Firm and #CEO Twitter Use",

abstract = "We examine how CEOs can facilitate the development of investor trust that helps mitigate the effects of negative information. Results from an experiment show that investors trust the CEO more and are more willing to invest in the firm when the CEO communicates firm news followed by a negative earnings surprise through a personal Twitter account than when the news and surprise comes from the CEO via a website or from the firm{\textquoteright}s Investor Relations Twitter account or website. A follow-up experiment shows that repeating the negative news does not incrementally affect investors who received the news from the CEO{\textquoteright}s Twitter account, but does further negatively impact investors who received the news via other disclosure mediums, especially those who received the news via the Investor Relations Twitter account. Our results have implications for firms and executives considering the costs and benefits of communicating with investors via Twitter.",

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