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The Role of Social Media in the Corporate Bond Market: Evidence from Twitter

Author

Listed:
  • Eli Bartov

    (Leonard N. Stern School of Business, New York University, New York, New York 10012)

  • Lucile Faurel

    (W.P. Carey School of Business, Arizona State University, Tempe, Arizona 85287)

  • Partha Mohanram

    (Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada)

Abstract

Prior studies document the role social media information plays in the stock market and the important dissimilarities between the bond and stock markets. Bridging these two types of literature, we examine the role of social media information in the corporate bond market. Analyzing a broad sample of messages by Twitter individual users, posted just prior to earnings announcements, containing bond, credit risk, and fundamental information, we find that aggregate Twitter opinion ( OPI ) predicts upcoming announcement bond returns and changes in credit default swap (CDS) spreads, and is associated with future changes in bond yield spreads and credit ratings, thereby providing economically important information to the bond market. This interpretation is bolstered by results from a variety of cross-sectional analyses. Finally, we document an association between OPI and future changes in default risk, which casts light on the nature of the Twitter information underlying our findings. Overall, our findings demonstrate that Twitter appears to disseminate potentially economically important information to even the presumably sophisticated bond and CDS investors, as well as information intermediaries.

Suggested Citation

  • Eli Bartov & Lucile Faurel & Partha Mohanram, 2023. "The Role of Social Media in the Corporate Bond Market: Evidence from Twitter," Management Science, INFORMS, vol. 69(9), pages 5638-5667, September.
    • Handle: RePEc:inm:ormnsc:v:69:y:2023:i:9:p:5638-5667
    DOI: 10.1287/mnsc.2022.4589
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