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Feedback effect of social media on corporate investment Efficiency: Evidence from Firm’s Twitter presence and engagement

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  • Singh, Atul
  • Tang, Vicki Wei

Abstract

We examine whether social media presence and engagement have a feedback effect on corporate investment efficiency. Utilizing 352 million responses from the corporate Twitter accounts of 2062 US firms, we find that both underinvesting and overinvesting firms deviate less from predicted investment levels after initiating presence on Twitter. Furthermore, the more engaged the followers are, the smaller the deviation from expected investment levels. The effects are robust to including information incorporated in stock prices and other information sources. Our findings provide evidence that managerial learning is one channel underlying the link between social media and corporate investment efficiency. Cross-sectional results suggest that the managerial learning effect is more pronounced for consumer-facing firms. We also find that underinvesting firms learn from their peers’ social media presence. Additionally, firms’ operational efficiency also improves, corroborating the feedback effect of social media. Additional tests rule out endogeneity-related issues.

Suggested Citation

  • Singh, Atul & Tang, Vicki Wei, 2025. "Feedback effect of social media on corporate investment Efficiency: Evidence from Firm’s Twitter presence and engagement," Journal of Contemporary Accounting and Economics, Elsevier, vol. 21(3).
    • Handle: RePEc:eee:jocaae:v:21:y:2025:i:3:s1815566925000505
    DOI: 10.1016/j.jcae.2025.100503
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    Keywords

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    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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