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Living in the Digital Age: The Usefulness of Twitter, YouTube and Instagram in Corporate Communication

This study examines the usefulness of Twitter, YouTube and Instagram in corporate communication. We document that Twitter communication helps investors interpret earnings news and associates with stronger price reactions to earnings announcements. YouTube videos and Instagram pictures have either negative or no effect on investors’ ability to understand earnings information. Further, firms that post on the three social platforms experience positive price reactions to earnings announcements regardless of the news content, which suggests that investors perceive social media communication to signal higher disclosure effort. The effects we document dominate in stocks with high retail ownership and are robust to endogeneity bias. Our results suggest not all social media platforms help investors interpret earnings news, though social media communication plays an important signalling role.