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The effect of twitter dissemination on cost of equity: A big data approach

Lookup NU author(s): Dr Marwa Elnahass, Professor Savvas Papagiannidis, Dr Aly Salama

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This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY-NC-ND).


Abstract

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).


Publication metadata

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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