Abstract
Purpose
The purpose of this paper is to investigate the relationship between customer’s electronic word-of-mouth (eWOM) regarding their direct service experiences with firms and these firms’ company value. The authors drew on the marketing-finance interface research approach to demonstrate how interactive social media adopted by individual customer relate to important firms’ financial performances.
Design/methodology/approach
The authors used seven American airline companies’ customers’ tweets collected during a 52-week observation period and paired with their corresponding financial data using stock returns and volatilities. Sentiment analysis algorithm and a vector autoregressive (VAR) model quantified the strong association between customer’s eWOM and these firms’ stock returns and volatilities.
Findings
The results show that customer’s eWOM regarding a firm positively associate with the firm’s stock return but negatively associate with its stock volatility; as negative valence of customer’s eWOM increases, the positive effect of eWOM on firm’s stock return decreases; the negative eWOM impacts on the stock market more profoundly compared with when both positive and negative sensitivities are considered; and eWOM’s wear-out effect is much shorter than that of traditional WOM.
Originality/value
The authors address a literature gap where little is known for how customer’s eWOM, that is evaluating firm services, can ultimately impact on firms’ long-term financial performances. The authors discuss how findings from this study offer implications for marketing management as well as strategic insights for practitioners and investment analysts alike.
Keywords
Acknowledgements
This research was supported by the National Natural Science Foundations of China (No. 71503254) awarded to Biao Guo, and the Research Development Fund (RDF-12-02-01) awarded to Jiyao Xun whilst Xun was a Lecturer at Xi’an Jiaotong-Liverpool University during 2012-2013 academic year.
Citation
Xun, J. and Guo, B. (2017), "Twitter as customer’s eWOM: an empirical study on their impact on firm financial performance", Internet Research, Vol. 27 No. 5, pp. 1014-1038. https://doi.org/10.1108/IntR-07-2016-0223
Publisher
:Emerald Publishing Limited
Copyright © 2017, Emerald Publishing Limited