@article{4816498a61f94a59852af2a5db880df3,
title = "Can social media distort price discovery? Evidence from merger rumors",
abstract = "We study whether social media can play a negative information role by impeding price discovery in the presence of highly speculative rumors. We focus on merger rumors, where most do not materialize. We find that merger rumors accompanied by greater Twitter activity elicit greater immediate market reaction even though rumor-related Twitter activity is unrelated to the probability of merger realization. The price distortion associated with tweet volume persists weeks after a rumor and reverses only after eight weeks. The price distortion is more pronounced for rumors tweeted by Twitter users with greater social influence, for target firms with low institutional ownership, and for rumors that supply more details. Our evidence suggests that social media can be a rumor mill that hinders the market's price discovery of potentially false information.",
keywords = "Merger and acquisition, Merger rumor, Persuasion bias, Rumor, Social media, Twitter",
author = "Weishi Jia and Giulia Redigolo and Susan Shu and Jingran Zhao",
note = "Funding Information: We thank the editor, John Core, and an anonymous reviewer for helpful comments and suggestions. We thank Mengyao Cheng, Carlo D{\textquoteright}Augusta, Ilia Dichev, Carlo Gallimberti, Amy Hutton, Lian Fen Lee, Alvis Lo, Michelle Lowry, Stan Markov, Jeff Ng, Grace Pownall, Sugata Roychowdhury, David Solomon, Ben Yost, participants at the 2018 EAA Annual Congress, and workshop participants at Boston College, CUHK, Emory University, ESADE Business School, ESSEC Business School, Georgia State University, Hong Kong Polytechnic University, Luiss University, MTSU, University of Hong Kong, and University of Rochester for valuable feedback and comments. Giulia Redigolo acknowledges funding from the Spanish Ministry of Science and Innovation (grant PGC2018-099700-A-I00). Funding Information: ? We thank the editor, John Core, and an anonymous reviewer for helpful comments and suggestions. We thank Mengyao Cheng, Carlo D'Augusta, Ilia Dichev, Carlo Gallimberti, Amy Hutton, Lian Fen Lee, Alvis Lo, Michelle Lowry, Stan Markov, Jeff Ng, Grace Pownall, Sugata Roychowdhury, David Solomon, Ben Yost, participants at the 2018 EAA Annual Congress, and workshop participants at Boston College, CUHK, Emory University, ESADE Business School, ESSEC Business School, Georgia State University, Hong Kong Polytechnic University, Luiss University, MTSU, University of Hong Kong, and University of Rochester for valuable feedback and comments. Giulia Redigolo acknowledges funding from the Spanish Ministry of Science and Innovation (grant PGC2018-099700-A-I00). Publisher Copyright: {\textcopyright} 2020 Elsevier B.V.",
year = "2020",
month = aug,
doi = "10.1016/j.jacceco.2020.101334",
language = "English",
volume = "70",
journal = "Journal of Accounting and Economics",
issn = "0165-4101",
publisher = "Elsevier",
number = "1",
}