Do Firms Strategically Disseminate? Evidence from Corporate Use of Social Media

We examine whether firms strategically disseminate information to the public. Strategic dissemination refers to a firm’s decision to use or not use certain channels of communication to disseminate firm-specific information. Understanding whether firms strategically disseminate is important because it reveals how managers try to shape a firm’s overall information environment, influence how capital market participants view the firm, and affect the price discovery process. Using firms’ discretionary use of Twitter to disseminate quarterly earnings announcements, we find that firms are less likely to disseminate via Twitter when the news is bad and when the magnitude of the bad news is worse, consistent with strategic behavior. Furthermore, firms tend to send fewer earnings announcement tweets and “rehash” tweets when the news is bad. Finally, we find evidence that the tweeting of bad news and the subsequent retweeting of that news by a firm’s followers are associated with more negative news articles written about the firm by the traditional media, highlighting a potential downside to Twitter dissemination.