The mediating role of customers' electronic word-of-mouth between firms' following-up actions and their stock performance in crisis events

This research focuses on a typical social media platform, i.e. micro-blogging websites, and explores the mediating role of customers' electronic word-of-mouth between firms' crisis management actions and their market value. In doing so, we seek to answer the question of what actions firms should resort to and how should they take those following-up actions after crisis events occurring in current information age. Our analysis is based on a dataset of customers' word-of-mouth behaviors collected from the largest Chinese micro-blogging website, as well as firm's action information collected from public new media sources and firm's performance information in stock market. Upon customers' information processing theory, we hypothesize that firm's action volume, complexity and covering-up character influence customers' word-of-mouth behaviors which further affect firms' market value recovery in crisis events. We expect that while the direct impact of firm's following-up actions on firm's market value during crisis events remains, customers' electronic word-of-mouth behaviors play an important chain effect in between. We also expect that this study will contribute to the business value of social media literature by revealing the instrumental role of customer that helps the finance market understand whether or how firm's wrongdoing leads to a faster/slower performance recovering. In addition, this study conveys important implications to firms' crisis management.