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The effect of SEC approval of social media for information dissemination

Author

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  • Dorminey, Jack W.
  • Dull, Richard B.
  • Schaupp, Ludwig Christian

Abstract

In April 2013, the SEC provided explicit guidance to public companies regarding social media use for material disclosures. This paper examines the effect of regulatory approval on the market reaction to financial disclosures distributed by firms via social media. The use of social media to disseminate information may lead to broader market interest in the stock. Social media use by firms is explored in three time periods: (1) prior to public SEC scrutiny of social media, (2) after the SEC filed a formal complaint about the use of social media, and (3) after the April 2013 guidance. The analysis demonstrates a positive association between social media use and market reaction as evidenced in trading volume. Second, the association between social media use by firms and trading volume is greatest following the SEC's guidance. Third, social media are used more extensively by disclosing firms in the period following explicit SEC guidance permitting its use.

Suggested Citation

  • Dorminey, Jack W. & Dull, Richard B. & Schaupp, Ludwig Christian, 2015. "The effect of SEC approval of social media for information dissemination," Research in Accounting Regulation, Elsevier, vol. 27(2), pages 165-173.
    • Handle: RePEc:eee:reacre:v:27:y:2015:i:2:p:165-173
    DOI: 10.1016/j.racreg.2015.09.007
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    Citations

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    Cited by:

    1. Nivo Ravaonorohanta & Mohammad Refakar, 2021. "Target Social Media Presence and Its Effects on Acquirers’ Decision," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 13(2), pages 1-1, February.
    2. Amin, Marian H. & Mohamed, Ehab K.A. & Elragal, Ahmed, 2021. "CSR disclosure on Twitter: Evidence from the UK," International Journal of Accounting Information Systems, Elsevier, vol. 40(C).
    3. Smith, Antoinette L. & Alfonso, Elio & Hogan, Robert, 2018. "The impact of an SEC investigation on conference call participation and analysts’ forecast quality," Research in Accounting Regulation, Elsevier, vol. 30(2), pages 148-158.

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