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July 2, 2018
Tom Snee

A new study from the University of Iowa confirms the expectation that publicly traded firms tend to strategically tweet financial information only if they have good news to report.

“Firms want to disseminate good news as widely as possible but not publicize bad news any more than is necessary,” says Clare Wang, associate professor of accounting in the Tippie College of Business. She is co-author of the study that finds firms are less likely to disseminate quarterly earnings through Twitter when their earnings miss analyst expectations.

While publicly traded firms are required by the SEC to publicly disclose their quarterly earnings, the method of dissemination is up to the company. Most firms issue a press release and conduct conference calls. Tweeting the results is optional.

Wang says the advantage of using Twitter and other social media channels is that they are initiated by the firm, making it easier to control the message, as compared to traditional media coverage initiated by journalists. Disseminating via Twitter is an opportunity to bring additional public attention to good news and help frame the analysis of an earnings announcement that disappoints in the firm’s favor.

The study looked at firms in the S&P 1500 that disseminated earnings announcements on Twitter between 2010 and 2013. While 712 of those firms tweeted an earnings announcement at least once, only 132 firms regularly and consistently did so. The study found firms that tweet earnings announcements are 12 percent less likely to do so when the news is bad.

But Wang says despite company efforts to focus on the positive in their tweets, followers tended to focus on the negative. The study found the public more likely to pay attention to negative stories, especially when the company’s bad news was re-tweeted by followers of its own account.

The study, “Do firms strategically disseminate? Evidence from corporate use of social media,” will be published in a forthcoming issue of the journal The Accounting Review.