Firms’ Strategic Dissemination of Tweets around Earnings Announcement Dates

We examine how firms disseminate social media messages around earnings announcements. To this end, we analyze the tweets published by S&P1500 constituents on quarterly earnings announcement dates between 2015 and 2019. We find evidence generally in line with firms’ strategic dissemination; firms use tweets strategically to promote good news while keeping silent anticipating bad news, which, however, is found only for firms with greater Twitter activities. We also find that the behavior varies with the type of tweets: firms use nonfinancial tweets differently than financial tweets, issuing (more) nonfinancial tweets when they have bad earnings news of a small magnitude. Our supplementary tests find that (1) a larger negative earnings surprise is associated with more likely forward-looking messages; and (2) strategic dissemination is pronounced with nonfinancial tweets for high litigation risk firms with a larger retail investor base and Twitter audience base. By identifying strategic use of corporate social media messages and offering insights for regulators regarding the misuse of social media communication, our study contributes to the ongoing discussion on firms’ use of social media as an alternative yet significant disclosure channel.