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Do social media constrain or promote company violations?

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Listed:
  • Jie Li
  • Li Yu
  • Xiaofeng Mei
  • Xu Feng

Abstract

Using retail investor posts on the stock forum from 2008 to 2019, we study the impact of social media on the incidence of company violations. We find that social media promotes company violations, which supports the ‘pressure effect’ rather than the ‘monitoring effect’. This conclusion holds even considering potential endogenous issues. In robustness tests, when alternative sample selection, alternative independent variables and alternative dependent variables are used, the results still show that social media promote company violations. Our study supports cognitive evaluation theory, which proposes that external pressure imposed on managers increases the likelihood of violations.

Suggested Citation

  • Jie Li & Li Yu & Xiaofeng Mei & Xu Feng, 2022. "Do social media constrain or promote company violations?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(1), pages 31-70, March.
    • Handle: RePEc:bla:acctfi:v:62:y:2022:i:1:p:31-70
    DOI: 10.1111/acfi.12780
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    2. Yang Gao & Chengjie Zhao & Bianxia Sun & Wandi Zhao, 2022. "Effects of investor sentiment on stock volatility: new evidences from multi-source data in China’s green stock markets," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-30, December.

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