The Impact of Social Media Activities on Stock Price Informativeness

Abstract

This study investigates the influence of social media activities on stock price informativeness. Using a panel of 49 countries with 231,462 balance-panel firm-year observations from 2010 to 2020, we find that social media activities increase stock price informativeness. Furthermore, social media engagement for political and civil activities reduces information asymmetries that are linked to greater stock price informativeness. We further evidence that the intensity of the impact of social media activities varies between economic development and sectors, which implies that while some of the social media activities proxies are more pronounced in developed countries, others are more pronounced in emerging economies. The same applies to the services and non-services sectors. The result is more pronounced when varying offline political actions are most commonly mobilised on social media. For identification, we employ principal component analysis, difference-in-difference, and propensity score matching.