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Negative peer disclosures, crash risk, and strategic change

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  • Below, Scott
  • Harris, Oneil
  • Linton, Charmaine
  • Ngo, Thanh

Abstract

By analyzing negative peer disclosures (NPDs) on Twitter, we provide evidence that crash risk decreases after tweeted firms are the subject of adverse peer tweets. NPDs also act as catalysts for companies to implement strategic changes, suggesting that managers are motivated to turn things around in response to negative tweets from their peers. Managers also take less risk and reduce financial statement opaqueness as a result. In scale and importance, the strategic change channel appears to be the main mechanism by which NPDs reduce stock price crashes. Moreover, in response to strategic shifts, auditors increase audit fees and analysts issue less optimistic earnings forecasts when they cover tweeted firms. Overall, our study illustrates the transformative effects of social media on product rivalry and market outcomes, and highlights NPDs as powerful tools for firm competition that hold managers accountable.

Suggested Citation

  • Below, Scott & Harris, Oneil & Linton, Charmaine & Ngo, Thanh, 2025. "Negative peer disclosures, crash risk, and strategic change," Journal of Behavioral and Experimental Finance, Elsevier, vol. 46(C).
    • Handle: RePEc:eee:beexfi:v:46:y:2025:i:c:s2214635025000449
    DOI: 10.1016/j.jbef.2025.101063
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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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