How Facebook influences non-professional investors’ affective reactions and judgments: The effect of disclosure platform and news valance
Journal of Financial Reporting and Accounting
ISSN: 1985-2517
Article publication date: 11 March 2019
Abstract
Purpose
The use of social networking websites by companies to disclose corporate news and by investors to collect information for investment purposes is increasing rapidly. However, the role of investors’ affective reactions to corporate disclosures on social networking websites is under-researched. This paper aims to examine how the disclosure platform (disclosing news on a company’s Facebook Web page or the corporate investor relations Web page) and news valence (positive or negative) jointly influence investors’ affective reactions to corporate news and stock price change judgments.
Design/methodology/approach
The authors conduct an experimental study using 364 participants from Amazon’s Mechanical Turk website as a proxy for reasonably informed investors.
Findings
Results show that the disclosure platform influences investors’ affective reactions and stock price change judgments when the corporate news is negative, but not when the corporate news is positive. In addition, investors’ affective reactions mediate the influence of the disclosure platform on investors’ stock price change judgments when the corporate news is negative rather than positive.
Originality/value
This paper extends the theory on affective reactions to a social networking context by showing that differences in disclosure platforms and news valence influence investors’ affective reactions to corporate news. In addition, the study’s theory and findings have significant implications for researchers, company managers and public relations specialists, capital market participants, regulators and investor education organizations and users of social networking websites.
Keywords
Acknowledgements
The authors are thankful to Fatima Alali, Sumatra Chakravarty, Lisa Eiler, James Gong, Paul Griffin, Richard Lu, Devin Shanthikumar, Myungsoo Son, Isho Tama-Sweet and participants at the California State University Fullerton Brown Bag, the 2015 ABO Research Conference and the 2016 Haskell and White Academic Conference for their helpful comments and suggestions. The authors appreciate the research assistance received from Megan Le and Amit Pandey. The authors are grateful to California State University, Fullerton, and California State University, San Marcos, for financial support.
Citation
Farkas, M. and Keshk, W. (2019), "How Facebook influences non-professional investors’ affective reactions and judgments: The effect of disclosure platform and news valance", Journal of Financial Reporting and Accounting, Vol. 17 No. 1, pp. 80-103. https://doi.org/10.1108/JFRA-10-2017-0092
Publisher
:Emerald Publishing Limited
Copyright © 2019, Emerald Publishing Limited