Can social media distort price discovery? Evidence from merger rumors

• 成果类型: Article
• 署名作者: Jia, Weishi; Redigolo, Giulia; Shu, Susan; Zhao, Jingran
• 署名单位: University System of Ohio; Cleveland State University; Universitat Ramon Llull; Escuela Superior de Administracion y Direccion de Empresas (ESADE); Boston College; Hong Kong Polytechnic University
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2020.101334
• 发表日期: 2020
• 关键词: cross-section; wisdom; CROWDS; slant

摘要

We study whether social media can play a negative information role by impeding price discovery in the presence of highly speculative rumors. We focus on merger rumors, where most do not materialize. We find that merger rumors accompanied by greater Twitter activity elicit greater immediate market reaction even though rumor-related Twitter activity is unrelated to the probability of merger realization. The price distortion associated with tweet volume persists weeks after a rumor and reverses only after eight weeks. The price distortion is more pronounced for rumors tweeted by Twitter users with greater social influence, for target firms with low institutional ownership, and for rumors that supply more details. Our evidence suggests that social media can be a rumor mill that hinders the market's price discovery of potentially false information. (C) 2020 Elsevier B.V. All rights reserved.