Seminar by Giulia Redigolo

SALA SEMINARI – 1° PIANO, PALAZZO LEVI CASES, VIA DEL SANTO 33 - ORE 15.30

18.04.2019

Seminar by Giulia Redigolo, ESADE Barcelona, Spain

Title: "To tweet or not to tweet? Social media disclosure and reputational damage" joint with X. Huan, A. Parbonetti and Z. Zhang

Abstract: We study the role of social media (i.e., Twitter) in the face of the LIBOR scandal. In particular, we examine financial institutions' use of social media during the scandal and whether it has a moderating effect on banks' reputational damage. To conduct our investigation, we analyze the security returns of banks that were allegedly involved in LIBOR manipulation during
the period from March 2011 to December 2013. The results are consistent with bank initiated Twitter activity having a positive moderating effect on returns when the scandal surfaces. While both abnormal Twitter volume and tweet length can mitigate the negative market consequences, the attempt by the alleged banks to obfuscate the severity of the scandal is offset by the dissemination of information operated by other users, in the form of retweets and hyperlinks. In additional analyses, we show that bank tweets characterized by a positive sentiment exacerbate the reputational damage. This paper aims to contribute to the growing literature on the impact of social media in the capital market by studying the information role of Twitter in the context of financial scandals.