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Lookup NU author(s): Professor Marwa ElnahassORCiD, Professor Savvas PapagiannidisORCiD, Dr Aly SalamaORCiD
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY-NC-ND).
Reducing information asymmetry between investors and a firm can have an impact on the cost of equity, especially in an environment or times of uncertainty. New technologies can potentially help disseminate corporate financial information, reducing such asymmetries. In this paper we analyse firms’ dissemination decisions using Twitter, developing a comprehensive measure of the amount of financial information that a company makes available to investors (iDisc) from a big data of firms’ tweets (1,197,208 tweets). Using a sample of 4,131 firm-year observations for 791 non-financial firms listed on the US NASDAQ stock exchange over the period 2009-2015, we find evidence that iDisc significantly reduces the cost of equity. These results are pronounced for less visible firms which are relatively small in size, have a low analyst following and a small number of investors. Highly visible firms are less likely to benefit from iDisc in influencing their cost of equity as other communication channels may have widely disseminated their financial information. Our investigations encourage managers to consider the benefits of directly spreading a firm’s financial information to stakeholders and potential investors using social media in order to reduce firm equity premium (COE).
Author(s): Albarrak MS, Elnahass M, Papagiannidis S, Salama A
Publication type: Article
Publication status: Published
Journal: International Journal of Information Management
Year: 2019
Volume: 50
Pages: 1-16
Print publication date: 01/02/2020
Online publication date: 06/05/2019
Acceptance date: 27/04/2019
Date deposited: 28/04/2019
ISSN (print): 0268-4012
ISSN (electronic): 1873-4707
Publisher: Elsevier
URL: https://doi.org/10.1016/j.ijinfomgt.2019.04.014
DOI: 10.1016/j.ijinfomgt.2019.04.014
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