Social media disclosure and reputational damage

Xing Huan, Antonio Parbonetti, Giulia Redigolo, Zhewei Zhang

Research output: Indexed journal article Articlepeer-review

Abstract

We provide new evidence on the effects of social media in the context of a financial scandal using a sample of banks that were accused of manipulating the London Interbank Offered Rate (LIBOR). We find that increased bank Twitter activity when the scandal surfaced has a positive moderating effect on equity returns. However, the dissemination of content operated by social media users has a negative counterbalancing effect, thus amplifying the impact of the scandal. In particular, tweets that are unrelated to the scandal and characterized by positive sentiment contribute to exacerbating the reputational damage suffered by banks. We contribute to the emerging literature on the role of social media in capital markets.

Original languageEnglish
Number of pages42
JournalReview of Quantitative Finance and Accounting
Early online dateJan 2024
DOIs
Publication statusE-pub ahead of print - Jan 2024

Keywords

  • Disclosure
  • LIBOR scandal
  • Operational risk
  • Reputation
  • Social media
  • Twitter

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