Social Media Improves Investor Communications

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Social Media Improves Investor Communications. Social media usage also improves the company’s information environment. Companies may benefit from developing different approaches to disseminating positive versus negative earnings news.

Conventionally, when a company wants to publicize investor-related information such as an earnings announcement, it would do so by sending a press release to intermediaries such as newswire services, equity research databases, and brokerage firms. A company does not know if or when any of its existing or prospective investors received the information.

Social Media Improves Investor Communications

With social media platforms such as Twitter, a company can send one or more short messages directly to a known number of followers with a link to a press release on its corporate website. As such, a company can use Twitter to target its news dissemination, increase the speed and flexibility of the news dissemination, and reduce information acquisition costs for its investors and the traditional media outlets that follow it.

Twitter and Facebook are the two most frequently adopted social media platforms for corporations and is highest for customer-facing industries such as meals, retail, books and services and lowest for industrial sectors such as oil and steel.

searchQuarterly earnings-related tweets are the most prevalent type of investor-focused tweets, far outnumbering tweets related to executive turnover, dividends, board of directors, and even new products and customers. The number of firm-quarters with earnings announcements on Facebook is approximately half the number on Twitter, suggesting that the preference for Twitter is even stronger when it comes to earnings news.

Using Twitter, rather than other social media data is advantageous because earnings announcements have been shown to be of first-order importance to investors and the information content of earnings announcements can be controlled more effectively than the information content of other financial disclosures. Also, the precise time that earnings announcements are disseminated through Twitter can be identified.

There can be a significant increase in the mean volume, primarily due to an increase in large trades. Therefore, while social media is commonly viewed as a dissemination channel that provides timely access to information for all investors, the results suggest that larger investors react more quickly to earnings-related tweets.

Social Media Improves Investor Communications

Studies show that the usage of social media by corporations has grown dramatically over a relatively short period of time, from less than 5 percent of S&P 1500 companies in 2008 to more than 50 percent in 2013. This trend suggests that social media usage for communicating with investors has the potential to become an integral part of many companies’ disclosure policies. The findings show that even in the absence of the Securities and Commission’s approval of social media as a channel for investor communication, companies used it to disseminate a variety of information, including earnings news, board and executive changes, new contracts, and dividends.

Appropriate social media policy for investor communications differs from social media usage for other business purposes, such as marketing campaigns, in which companies often want to generate viral reactions to social media dissemination. At OTCPRGroup we incorporate the latest Social Media Solutions , Website design, SEO Optimization and video productions in order to maximize the investor communications. Companies that adopt social media disclosure policies benefit from developing different approaches to disseminating positive versus negative earnings news. Social media usage improves the company’s information environment and it improves investor communications.

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    Douglas Baker, 561-807-6350-

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