Social Media, Accounting Information Networks, and Market Reaction: The Effects of Firm-to-Investor, Stakeholder-to-Investor, and Investor-to-Investor Twitter Networks

The widespread adoption of social media has engendered notable changes in who is involved in the production, dissemination, and reformulation of market-relevant information. Building on this idea, this study posits that different types of accounting information networks feature different types of actors who produce and disseminate different types of information and thus have different market effects. This study specifically conceptualizes three types of Twitter-based accounting information networks – firm-to-investor networks, stakeholder-to-investor networks, and investor-to-investor networks – and tests for the direct and interactive effects these networks have on abnormal returns around SEC Form 8-K filing events. The results confirm the broad proposition that the three online information networks play distinct roles in the market for information. In an era of social media-driven “truthiness,” “clickbait,” “information silos,” “firestorms,” and “fake news,” it is important to better understand how different types of online information communities are influencing the capital markets; this study helps propel research further in this direction.