Does Twitter (now known as “X”) disclosure influence share price?

Abstract

An effective corporate communication strategy is essential for firms to establish and maintain good relationships with capital market participants to ensure continued financial support. Firms are increasingly adopting social media platforms like Twitter as a medium of communication. This study investigates the effectiveness of Twitter as a channel for firms to disclose financial performance and enhance their overall information environment, thereby improving share price performance. In doing so, this study seeks to establish whether JSE-firms that tweet about financial performance experience better share price performance. Additionally, this study aims to determine whether share price performance varies depending on the nature of the news, favourable or unfavourable, contained in the tweets about financial performance. This study employs ordinary least squares (OLS) regression analyses using Twitter and share price data of 148 JSE-listed firms over their 2022 fiscal year. This study reveals a positive relationship between the frequency of firms' tweets about financial performance and changes in share price. Additionally, a positive relationship exists between the type of news disclosed in tweets about financial performance and changes in share price. The findings of this study contribute to Agency Theory, Internet Investor Relations (IIR) and dialogic communication literature, as it provides evidence of the benefits of utilising social media as a dialogic communication channel to effectively communicate with capital market participants to improve the firm's information environment to obtain and maintain their continued financial support.