Wang Twitter
Tuesday, October 16, 2018
By Tom Snee

A study from the Department of Accounting examines publicly traded firms’ use of Twitter to disseminate financial reporting information and confirms what some have long suspected:  firms tend to only tweet about their financial results when the news is good.

“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, and 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 firm. 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 platforms is that they are initiated by the firm, making it easier to control the message, as compared to traditional media coverage initiated by the press. Disseminating via Twitter is an opportunity to bring additional public attention to good news and help frame the analysis of a disappointing earnings announcement in the firm’s favor.

Wang’s 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 their earnings miss analyst expectations.

But Wang says despite the firms’ efforts to focus on the positive in their tweets, followers are more interested in the negative. The study found that earnings announcements with bad news were more likely to be re-tweeted by the firms’ followers.

The study, “Do firms strategically disseminate? Evidence from corporate use of social media,” was published in the July 2018 issue of the journal The Accounting Review.

This article first appeared in the 2018 edition of The Iowa Ledger, a magazine for alumni and friends of the UI Department of Accounting.