Should Companies Use Social Media to Share Financial Information?
Since its inception, social media has been a way to share information between friends and family—pictures of the kids’ first day of school, “tried and true” recipes, birthday wishes and the like. Companies have feared being “left behind” if they don’t use social media to the fullest.
“Companies are like the geeky kids at a party. They’re glad to be there, but once they’re there, they’re trying to figure out how to be cool,” says Neal Snow, assistant professor of accounting.
With a little more than half of all publicly traded companies communicating on social media channels, Snow, in two separate studies, explores the impact of using, say, Facebook or Twitter, to release hard, fact-based financial news such as earnings and sales figures.
In one study, Snow and co-author Robert Marley of the Sykes College of Business at University of Tampa acknowledged that managers often feel pressure to establish a social media presence that differentiates their organization from competitors. However, the study suggests that financial information may not be a good fit for social media channels.
In asking investors and social media users about their preferences, Snow and Marley found that respondents preferred marketing and consumer-oriented information—on new products, store locations and upcoming sales, for example—over financial news.
“It just doesn’t really benefit the company as much as it could,” Snow says. “There are more productive strategies” for utilizing social media channels. The findings were consistent among investors and non-investors, he says.
“The takeaway from this research,” Snow says, “is that, most likely, it’s not going to hurt you to post financial information. But you’re really not using [social media] to its potential. You’re not using it for its intended purpose—social interaction.”
In another study, Snow and Jason Rasso of the Darla School of Business at the University of South Carolina explored how investors process financial information received from social media channels as opposed to a company’s website.
Is the information received differently? Snow and Rasso found that financial information received via any social medium creates a cognitive dissonance, or an uncomfortable feeling that occurs when behaviors contradict beliefs.
“We find that financial disclosures on social media are associated with lower overall investor belief of management credibility, which we show to significantly influence investor judgment and decisions about the company,” Snow and Rasso write in their report.
Snow and Rasso also found that companies must be strategic in disclosing financial information on social media channels. Good financial news appeared to be received slightly better by investors when tweeted by a company that normally sends social information. On the other hand, the report said, bad financial news was perceived as “less negative” when delivered by a company’s Twitter feed as opposed to the CEO’s—a person they “know.”
Overall, Snow suspects it might not be a bad idea for companies to let go of using social media to deliver quarterly earnings or sales figures.
“The boat may not be taking them where they want to go,” he says.
Story by Mariella Miller
Illustration by Harry Campbell
This story appears as "To Tweet or Not to Tweet" in the 2018 Lehigh Research Review.