Tweeting Away Firm Value: How Investors Evaluate CEOs' Use of Social Media
47 Pages Posted: 31 Aug 2013 Last revised: 23 May 2023
Date Written: May 22, 2023
Abstract
Our study examines CEOs’ use of social media and how investors evaluate such activity. We propose that when a company is comparatively uncommunicative and makes few announcements, a CEO’s adoption of social media can improve the information environment and increase the price investors are willing to pay for a share of the company. At the same time, when a CEO sends unusually many posts, sends posts that are mostly non-work related, reaches online “celebrity status,” and works for a firm with weak corporate governance, social media activity can be seen as an indication of “unfocusedness” and “self-centeredness” and lower the price investors are willing to pay. Our analysis of S&P 1500 CEOs with active personal Twitter accounts yields strong support for our predictions. We discuss the implications of our findings for the strategic leadership and the corporate governance literatures.
Keywords: Social Media Usage, Information Environment, Agency Cost, Strategic Leadership, Corporate Governance
JEL Classification: G12, G14, G38, M41, M48
Suggested Citation: Suggested Citation
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