Social Media and Firm Equity Value
TL;DR: The results derived from vector autoregressive models suggest that social media-based metrics Web blogs and consumer ratings are significant leading indicators of firm equity value and social media has a faster predictive value, i.e., shorter “wear-in” time, than conventional online media.
Abstract: Companies have increasingly advocated social media technologies to transform businesses and improve organizational performance. This study scrutinizes the predictive relationships between social media and firm equity value, the relative effects of social media metrics compared with conventional online behavioral metrics, and the dynamics of these relationships. The results derived from vector autoregressive models suggest that social media-based metrics Web blogs and consumer ratings are significant leading indicators of firm equity value. Interestingly, conventional online behavioral metrics Google searches and Web traffic are found to have a significant yet substantially weaker predictive relationship with firm equity value than social media metrics. We also find that social media has a faster predictive value, i.e., shorter “wear-in” time, than conventional online media. These findings are robust to a consistent set of volume-based measures total blog posts, rating volume, total page views, and search intensity. Collectively, this study proffers new insights for senior executives with respect to firm equity valuations and the transformative power of social media.
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TL;DR: A broad research agenda for understanding the relationships among social media, business, and society is outlined and it is hoped that the flexible framework outlined will help guide future research and develop a cumulative research tradition in this area.
Abstract: Social media are fundamentally changing the way we communicate, collaborate, consume, and create. They represent one of the most transformative impacts of information technology on business, both within and outside firm boundaries. This special issue was designed to stimulate innovative investigations of the relationship between social media and business transformation. In this paper we outline a broad research agenda for understanding the relationships among social media, business, and society. We place the papers comprising the special issue within this research framework and identify areas where further research is needed. We hope that the flexible framework we outline will help guide future research and develop a cumulative research tradition in this area.
778 citations
Cites background from "Social Media and Firm Equity Value"
...In the current issue, Luo et al. (2013) show that market returns of technology firms can be predicted by social media....
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TL;DR: The integrated view of the extant literature that the study presents can help avoid duplication by future researchers, whilst offering fruitful lines of enquiry to help shape research for this emerging field of social media research.
Abstract: Social media comprises communication websites that facilitate relationship forming between users from diverse backgrounds, resulting in a rich social structure. User generated content encourages inquiry and decision-making. Given the relevance of social media to various stakeholders, it has received significant attention from researchers of various fields, including information systems. There exists no comprehensive review that integrates and synthesises the findings of literature on social media. This study discusses the findings of 132 papers (in selected IS journals) on social media and social networking published between 1997 and 2017. Most papers reviewed here examine the behavioural side of social media, investigate the aspect of reviews and recommendations, and study its integration for organizational purposes. Furthermore, many studies have investigated the viability of online communities/social media as a marketing medium, while others have explored various aspects of social media, including the risks associated with its use, the value that it creates, and the negative stigma attached to it within workplaces. The use of social media for information sharing during critical events as well as for seeking and/or rendering help has also been investigated in prior research. Other contexts include political and public administration, and the comparison between traditional and social media. Overall, our study identifies multiple emergent themes in the existing corpus, thereby furthering our understanding of advances in social media research. The integrated view of the extant literature that our study presents can help avoid duplication by future researchers, whilst offering fruitful lines of enquiry to help shape research for this emerging field.
670 citations
Cites background from "Social Media and Firm Equity Value"
...About seven studies were interested in exploring the relationship between social media use and value creation (for instance, Luo et al. 2013; Barrett et al. 2016) in terms of firm equity, customer retention, social position, and firm value (2010–2016)....
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...Firms are recognizing social media as a prominent indicator of equity value that not only improves short-term performance, but also brings about long-term productivity benefits (Luo et al. 2013)....
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...Luo et al. (2013) suggest that social media has faster predictive value than conventional online media, and that the embedded metrics like consumer ratings are leading indicators of a firm’s equity....
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01 Nov 2013
TL;DR: The findings suggest that overall social media has a stronger relationship with firm stock performance than conventional media while social and conventional media have a strong interaction effect on stock performance.
Abstract: This study aims to investigate the effect of social media and conventional media, their relative importance, and their interrelatedness on short term firm stock market performances. We use a novel and large-scale dataset that features daily media content across various conventional media and social media outlets for 824 public traded firms across 6 industries. Social media outlets include blogs, forums, and Twitter. Conventional media includes major newspapers, television broadcasting companies, and business magazines. We apply the advanced sentiment analysis technique that goes beyond the number of mentions (counts) to analyze the overall sentiment of each media resource toward a specific company on the daily basis. We use stock return and risk as the indicators of companies' short-term performances. Our findings suggest that overall social media has a stronger relationship with firm stock performance than conventional media while social and conventional media have a strong interaction effect on stock performance. More interestingly, we find that the impact of different types of social media varies significantly. Different types of social media also interrelate with conventional media to influence stock movement in various directions and degrees. Our study is among the first to examine the effect of multiple sources of social media along with the effect of conventional media and to investigate their relative importance and their interrelatedness. Our findings suggest the importance for firms to differentiate and leverage the unique impact of various sources of media outlets in implementing their social media marketing strategies.
415 citations
TL;DR: In this article, the authors describe the effect of social media advertising content on customer engagement using data from Facebook and find that inclusion of widely used content related to brand personality is associated with higher levels of consumer engagement (Likes, comments, shares) with a message.
Abstract: We describe the effect of social media advertising content on customer engagement using data from Facebook. We content-code 106,316 Facebook messages across 782 companies, using a combination of Amazon Mechanical Turk and natural language processing algorithms. We use this data set to study the association of various kinds of social media marketing content with user engagement—defined as Likes, comments, shares, and click-throughs—with the messages. We find that inclusion of widely used content related to brand personality—like humor and emotion—is associated with higher levels of consumer engagement (Likes, comments, shares) with a message. We find that directly informative content—like mentions of price and deals—is associated with lower levels of engagement when included in messages in isolation, but higher engagement levels when provided in combination with brand personality–related attributes. Also, certain directly informative content, such as deals and promotions, drive consumers’ path to conversio...
371 citations
TL;DR: In this paper, the authors investigate the relationship between environmental, social, and governance controversies and firm market value and find that ESG controversies are associated with greater firm value, however, when interacted with the corporate social performance (CSP) score, ESG controversy are found to have no direct effect on firm value while the interaction appears to be highly and significantly positive.
Abstract: The aim of this paper is to investigate the relationship between environmental, social, and governance (ESG) controversies and firm market value. We use a unique dataset of more than 4000 firms from 58 countries during 2002–2011. Primary analysis surprisingly shows that ESG controversies are associated with greater firm value. However, when interacted with the corporate social performance (CSP) score, ESG controversies are found to have no direct effect on firm value while the interaction appears to be highly and significantly positive. Building on this evidence, we attempt to explore the channels through which CSP may enhance market value. Conducting sample split analysis indicates that higher CSP score has an impact on market value only for high-attention firms, those firms which are larger, perform better, located in countries with greater press freedom, more searched on the Internet, more followed by analysts, and have an improved corporate social reputation. Thus, our findings provide new insights on the role of firm visibility through which firms can profit from their CSP.
286 citations
References
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TL;DR: In this article, the authors identify five common risk factors in the returns on stocks and bonds, including three stock-market factors: an overall market factor and factors related to firm size and book-to-market equity.
24,874 citations
TL;DR: Efficient Capital Markets: A Review of Theory and Empirical Work Author(s): Eugene Fama Source: The Journal of Finance, Vol. 25, No. 2, Papers and Proceedings of the Twenty-Eighth Annual Meeting of the American Finance Association New York, N.Y. December, 28-30, 1969 (May, 1970), pp. 383-417 as mentioned in this paper
Abstract: Efficient Capital Markets: A Review of Theory and Empirical Work Author(s): Eugene F. Fama Source: The Journal of Finance, Vol. 25, No. 2, Papers and Proceedings of the Twenty-Eighth Annual Meeting of the American Finance Association New York, N.Y. December, 28-30, 1969 (May, 1970), pp. 383-417 Published by: Blackwell Publishing for the American Finance Association Stable URL: http://www.jstor.org/stable/2325486 Accessed: 30/03/2010 21:28
18,295 citations
"Social Media and Firm Equity Value" refers background in this paper
...In the finance literature, the efficient market hypothesis holds that any new information that changes market expectations will move firm stock price (Fama 1970, Samuelson 1970)....
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...New information that changes market expectations among investors will have an impact on firm equity value (Samuelson 1965, Fama 1970)....
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TL;DR: Using a sample free of survivor bias, this paper showed that common factors in stock returns and investment expenses almost completely explain persistence in equity mutual fund's mean and risk-adjusted returns.
Abstract: Using a sample free of survivor bias, I demonstrate that common factors in stock returns and investment expenses almost completely explain persistence in equity mutual funds' mean and risk-adjusted returns Hendricks, Patel and Zeckhauser's (1993) "hot hands" result is mostly driven by the one-year momentum effect of Jegadeesh and Titman (1993), but individual funds do not earn higher returns from following the momentum strategy in stocks The only significant persistence not explained is concentrated in strong underperformance by the worst-return mutual funds The results do not support the existence of skilled or informed mutual fund portfolio managers PERSISTENCE IN MUTUAL FUND performance does not reflect superior stock-picking skill Rather, common factors in stock returns and persistent differences in mutual fund expenses and transaction costs explain almost all of the predictability in mutual fund returns Only the strong, persistent underperformance by the worst-return mutual funds remains anomalous Mutual fund persistence is well documented in the finance literature, but not well explained Hendricks, Patel, and Zeckhauser (1993), Goetzmann and Ibbotson (1994), Brown and Goetzmann (1995), and Wermers (1996) find evidence of persistence in mutual fund performance over short-term horizons of one to three years, and attribute the persistence to "hot hands" or common investment strategies Grinblatt and Titman (1992), Elton, Gruber, Das, and Hlavka (1993), and Elton, Gruber, Das, and Blake (1996) document mutual fund return predictability over longer horizons of five to ten years, and attribute this to manager differential information or stock-picking talent Contrary evidence comes from Jensen (1969), who does not find that good subsequent performance follows good past performance Carhart (1992) shows that persistence in expense ratios drives much of the long-term persistence in mutual fund performance My analysis indicates that Jegadeesh and Titman's (1993) one-year momentum in stock returns accounts for Hendricks, Patel, and Zeckhauser's (1993) hot hands effect in mutual fund performance However, funds that earn higher
13,218 citations
01 Jan 2001
TL;DR: In this article, it is shown that the cross spectrum between two variables can be decomposed into two parts, each relating to a single causal arm of a feedback situation, and measures of causal lag and causal strength can then be constructed.
Abstract: There occurs on some occasions a difficulty in deciding the direction of causality between two related variables and also whether or not feedback is occurring. Testable definitions of causality and feedback are proposed and illustrated by use of simple two-variable models. The important problem of apparent instantaneous causality is discussed and it is suggested that the problem often arises due to slowness in recordhag information or because a sufficiently wide class of possible causal variables has not been used. It can be shown that the cross spectrum between two variables can be decomposed into two parts, each relating to a single causal arm of a feedback situation. Measures of causal lag and causal strength can then be constructed. A generalization of this result with the partial cross spectrum is suggested.The object of this paper is to throw light on the relationships between certain classes of econometric models involving feedback and the functions arising in spectral analysis, particularly the cross spectrum and the partial cross spectrum. Causality and feedback are here defined in an explicit and testable fashion. It is shown that in the two-variable case the feedback mechanism can be broken down into two causal relations and that the cross spectrum can be considered as the sum of two cross spectra, each closely connected with one of the causations. The next three sections of the paper briefly introduce those aspects of spectral methods, model building, and causality which are required later. Section IV presents the results for the two-variable case and Section V generalizes these results for three variables.
11,896 citations
"Social Media and Firm Equity Value" refers methods in this paper
...Test for Granger Causality Following Tirunillai and Tellis (2012), we conduct Granger causality tests (Granger 1969) and report the results in Table 4....
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