Prior studies have demonstrated that company-generated tweets as a device for the dissemination of corporate announcements help reduce information asymmetry. This paper demonstrates that user-generated tweets around corporate announcements have information content in addition to the information content of the announcement itself. Using a sample of S&P 1500 firms, we test the effects of abnormal levels of user-generated tweets and abnormal sentiment in the tweets over the three days surrounding 8-K filings of unanticipated events on market returns and liquidity of stocks. Results show that abnormal levels of user-generated tweets are positively associated with both the absolute cumulative abnormal returns and cumulative abnormal trading volume. We also find an indication of a cautionary stance by the market when sentiment is negative around the announcements. Our results have economic significance from both the stock valuation and the stock liquidity perspectives.
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Research Article| April 01 2021
Is User-Generated Twittersphere Activity Associated with Stock Market Reactions to 8-K Filings?
ROGER DEBRECENY ;
Asheq Rahman ;
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ROGER DEBRECENY, Asheq Rahman, TAWEI WANG; Is User-Generated Twittersphere Activity Associated with Stock Market Reactions to 8-K Filings?. Journal of Information Systems 2021; doi: https://doi.org/10.2308/ISYS-2020-034
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