Twitter/X activity and financial performance: Evidence from European listed companies

Abstract
Objective: The study aims to investigate the adoption level of Twitter/X for corporate communication in the European context, specifically aspects such as the creation of Twitter accounts, follower number, and tweet frequency. We expand the data analysis framework to provide a comprehensive description of the different types of businesses using Twitter. The article’s ultimate goal is to provide insight into their financial characteristics, including profitability, growth options, and leverage.
Research Design & Methods: Using a large novel dataset (nearly 5.5 million tweets) from 41 European stock exchanges, we provide a comprehensive picture of the social media activity of 21 319 listed companies. We applied box plots, data visualisation, and exploratory data analysis to provide a concise visual summary of the data’s distribution to compare multiple datasets or identify any potential outliers or skewness.
Findings: Our findings indicate that growth companies are more likely to use Twitter/X for corporate communications. However, the relationship between profitability and Twitter adoption is not clear. The level of Twitter/X adoption for corporate communication in companies listed in Europe is lower than in the Northern American ones.
Implications & Recommendations: Companies should consider adopting social media as part of their communication strategy to enhance their financial performance. Our study contributes to the understanding of social media’s role in corporate communication and its potential impact on the financial performance of European listed firms.
Contribution & Value Added: The literature review reveals that the predominant focus of Twitter research has been on samples derived from the US market, whereas studies pertaining to Europe tend to concentrate on specific markets or sectors. To our knowledge, there is no comprehensive research on listed Twitter-using firms in the EU.
Keywords
stock markets, Twitter, social media, corporate communication, financial performance
Author Biography
Katarzyna Byrka-Kita
Associate Professor at the University of Szczecin. Her research interests include business valuation, financial strategy, corporate finance and corporate governance. Project Investigator and Project Co-investigator in several projects financed by the National Science Center. Author of several monographs and over 90 scientific articles.
Renata Gola
PhD student at the University of Szczecin. She holds a master’s degree in economics and an engineering degree in production management from her home university. Her research focuses on the impact of behavioural factors on the valuation of companies on European markets. Her main specialization is Business Intelligence Analysis for SME companies.
Jacek Cypryjański
Associate Professor in the Institute of Economics and Finance at the University of Szczecin, Poland. He received a PhD from his home university and defended the habilitation thesis at the Collegium of Economic Analysis of the Warsaw School of Economics. His current research interests include exploratory data analysis of large databases and public registers in the areas of economics and demography. In addition to his academic activities, he acts as a business intelligence consultant.
Christophe J. Godlewski
Full Professor of Corporate Finance & Banking, University of Strasbourg, France. His research interests include financial intermediation, financial contracting, corporate finance, and emerging markets. He has published more than 40 articles in peer-reviewed journals (such as Journal of Corporate Finance, Journal of Banking and Finance, Journal of Business Finance and Accounting, Financial Management) and presented at more than 100 international conferences. He is the Editor of Finance, the scientific journal of the French Finance Association.
References
- Akmese, H., Aras, S., & Akmese, K. (2016). Financial Performance and Social Media: A Research on Tourism Enterprises Quoted in Istanbul Stock Exchange (BIST). Procedia Economics and Finance, 39, 705-710. https://doi.org/10.1016/S2212-5671(16)30281-7
- Al Guindy, M. (2021). Corporate Twitter use and cost of equity capital. Journal of Corporate Finance, 68, 101926. https://doi.org/10.1016/j.jcorpfin.2021.101926
- Al Guindy, M., Naughton, J.P., & Riordan, R. (2024). The evolution of corporate twitter usage. Journal of Business Finance Accounting, 51(3-4), 819-845. https://doi.org/10.1111/jbfa.12758
- Albarrak, M.S., Cao, N.D., Salama, A., & Aljughaiman, A.A. (2023). Twitter carbon information and cost of equity: the moderating role of environmental performance. Eurasian Business Review, 13(3), 693-718. https://doi.org/10.1007/s40821-022-00225-0
- Albarrak, M.S., Elnahass, M., Papagiannidis, S., & Salama, A. (2020). The effect of twitter dissemination on cost of equity: A big data approach. International Journal of Information Management, 50, 1-16. https://doi.org/10.1016/j.ijinfomgt.2019.04.014
- Ang, J.S., Hsu, C., Tang, D., & Wu, C. (2021). The role of social media in corporate governance. The Accounting Review, 96(2), 1-32. https://doi.org/10.2308/TAR-2018-0144
- Bank, S., Yazar, E.E., & Sivri, U. (2019). Can social media marketing lead to abnormal portfolio returns?. European Research on Management and Business Economics, 25(2), 54-62. https://doi.org/10.1016/j.iedeen.2019.04.006
- Best E., & Caylor M. (2019). Risks and rewards of financial disclosure on Twitter: What CPAs and management should know. The CPA Journal, 89(6), 42-47. Retrieved from https://www.cpajournal.com/2019/06/26/risks-and-rewards-of-financial-disclosure-on-twitter/ on October 7, 2024.
- Bhattacharya, S., & Chiesa, G. (1995). Proprietary information, financial intermediation, and research incentives. Journal of Financial Intermediation, 4(4), 328-357. https://doi.org/10.1006/jfin.1995.1014
- Blankespoor, E., Miller, G.S., & White, H.D. (2014). The role of dissemination in market liquidity: Evidence from firms’ use of Twitter. Accounting Review, 89(1), https://doi.org/10.2308/accr-50576
- Chen, J., & Shen, X.L. (2015). Consumers’ decisions in social commerce context: An empirical investigation. Decision Support Systems, 79, 55-64. https://doi.org/10.1016/j.dss.2015.07.012
- Cole, B., Daigle, J., & Van Ness, B.F. (2015). Do Tweets Matter for Shareholders? An Empirical Analysis. Journal of Accounting and Finance, 15(3), 39-52. Retrieved from http://www.na-businesspress.com/JAF/ColeB_Web15_3_.pdf on October 7, 2024.
- de Oliveira Santini, F., Ladeira, W.J., Pinto, D.C., Herter, M.M., Sampaio, C.H., & Babin, B.J. (2020). Customer engagement in social media: a framework and meta-analysis. Journal of the Academy of Marketing Science, 48(6), 1211-1228. https://doi.org/10.1007/s11747-020-00731-5
- Debreceny, D.R., Wang, T., & Zhou, M. (2019). Research in Social Media: Data Sources and Methodologies. Journal of Information Systems, 33(1), 1-28. https://doi.org/10.2308/isys-51984
- Feng, X., & Johansson, A.C. (2019). Top executives on social media and information in the capital market: Evidence from China. Journal of Corporate Finance, 58, 824-857. https://doi.org/10.1016/j.jcorpfin.2019.04.009
- Filip, A., Ghio, A., & Paugam, L. (2021). Accounting information in innovative small cap firms: evidence from London’s Alternative Investment Market. Accounting and Business Research, 51(4), 421-456. https://doi.org/10.1080/00014788.2020.1842168
- Forbes. (2018). Social Media is Increasing Brand Engagement and Sales. Retrieved from https://www.forbes.com/sites/tjmccue/2018/06/26/social-media-is-increasing-brand-engagement-and-sales/ on October 7, 2024.
- Gartner. (2020). Gartner Reveals Five Major Trends Shaping The Evolution Of Analytics And Business Intelligence. [online] Retrieved from https://www.gartner.com/en/newsroom/press-releases/2019-10-02-gartner-reveals-five-major-trends-shaping-the-evoluti on October 7, 2024.
- Hamade, M., Hussainey, K., & Albitar, K. (2024). Corporate reporting through social media: a comprehensive literature review. Journal of Accounting Literature. Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JAL-07-2024-0159
- Hirshleifer, D., Lim, S.S., & Teoh, S.H. (2009). Driven to Distraction: Extraneous Events and Underreaction to Earnings News. The Journal of Finance, 64(5), 2289-2325. https://doi.org/10.1111/j.1540-6261.2009.01501.x
- Ibrahim, A.E.A., Hussainey, K., Nawaz, T., Ntim, C., & Elamer, A. (2022). A systematic literature review on risk disclosure research: State-of-the-art and future research agenda. International Review of Financial Analysis, 82, 102217. https://doi.org/10.1016/j.irfa.2022.102217
- Ibrahim, N.F., & Wang, X. (2019). Decoding the Sentiment Dynamics of Online Retailing Customers: Time Series Analysis of Social Media. Computers in Human Behavior, 96, 32-45. 10.1016/j.chb.2019.02.004
- Jensen, M.C., & Meckling, W.H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3(4), 305-360. https://doi.org/10.1016/0304-405X(76)90026-X
- Jung, M.J., Naughton, J.P., Tahoun, A., & Wang, C. (2018). Do Firms Strategically Disseminate? Evidence from Corporate Use of Social Media. The Accounting Review, 93(4), 225-252. https://doi.org/10.2308/accr-51906
- Kim, J., Lim, J.H., & Yoon, K. (2022). How do the Content, Format, and Tone of Twitter-Based Corporate Disclosure Vary Depending on Earnings Performance?. International Journal of Accounting Information Systems, 47, 100574. https://doi.org/10.1016/j.accinf.2022.100574
- Lee, K., Oh, W.Y., & Kim, N. (2013). Social media for socially responsible firms: Analysis of Fortune 500’s Twitter profiles and their CSR/CSIR ratings. Journal of Business Ethics, 118, 791-806. https://doi.org/10.1007/s10551-013-1961-2
- Lee, L.F., Hutton, A.P., & Shu, S. (2015). The Role of Social Media in the Capital Market: Evidence From Consumer Product Recalls. Journal of Accounting Research, 53(2), 367-404. https://doi.org/10.1111/1475-679X.12074
- Li, T., Berens, G., & de Maertelaere, M. (2013). Corporate Twitter Channels: The Impact of Engagement and Informedness on Corporate Reputation. International Journal of Electronic Commerce, 18(2), 97-126. https://doi.org/10.2753/JEC1086-4415180204
- Liu, L., Wu, J., Li, P., & Li, Q. (2015). A Social-Media-Based Approach to Predicting Stock Comovement. Expert Systems with Applications, 42(8), 3893-3901. https://doi.org/10.1016/j.eswa.2014.12.049
- Liu, L., Wu, J., Yu, Y., Li, Q., & Lin, Z. (2013). Microblogging Metrics and Stock Return Comovement. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2382971
- Millar, C.C., Eldomiaty, T.I., Choi, C.J., & Hilton, B. (2005). Corporate governance and institutional transparency in emerging markets. Journal of Business Ethics, 59, 163-174. https://doi.org/10.1007/s10551-005-3412-1
- Nuseir, M., & Qasim, A. (2021). Investor Relations in the Era of Social Media: Systematic Literature Review of Social Media As A Strategic Corporate Disclosure Tool. Journal of Financial Reporting and Accounting, 19(5), 819-838. https://doi.org/10.1108/JFRA-06-2020-0160
- Paniagua, J., & Sapena, J. (2014). Business Performance and Social Media: Love or Hate?. Business Horizons, 57(6), 719-728. https://doi.org/10.1016/j.bushor.2014.07.005
- Pansari, A., & Kumar, V. (2017). Customer Engagement: The Construct, Antecedents, and Consequences. Journal of the Academy of Marketing Science, 45(3), 294-311. https://doi.org/10.1007/s11747-016-0485-6
- Perotti, E.C., & von Thadden, E.L. (2001). Outside finance, dominant investors and strategic transparency. Dominant Investors and Strategic Transparency, 01-019/2. Retrieved from https://www.econstor.eu/bitstream/10419/85989/1/01019.pdf on October 7, 2024.
- Prokofieva, M. (2015). Twitter-Based Dissemination of Corporate Disclosure and the Intervening Effects of Firms’ Visibility: Evidence from Australian-Listed Companies. Journal of Information Systems, 29(2), 107-136. https://doi.org/10.2308/isys-50994
- Rakowski, D., Shirley, S.E., & Stark, J.R. (2021). Twitter Activity, Investor Attention, and the Diffusion of Information. Financial Management, 50(1), 3-46. https://doi.org/10.1111/fima.12307
- Ranco, G., Aleksovski, D., Caldarelli, G., Grčar, M., & Mozetič, I. (2015). The Effects of Twitter Sentiment on Stock Price Returns. PloS One, 10(9), e0138441. https://doi.org/10.1371/journal.pone.0138441
- Ravaonorohanta, N., & Sayumwe, M. (2020). Social Media Presence and Organizational Performance: An Empirical Study on Companies’ Presence on Twitter. Contemporary Management Research, 16(2), 123-144. https://doi.org/10.7903/cmr.20095
- Schiuma, G., Raimo, N., Bresciani, S., Ricciardelli, A., & Vitolla, F. (2024). Intellectual capital information via Twitter: the effect on firm value. Journal of Intellectual Capital, 25(2/3), 468-487. https://doi.org/10.1108/JIC-09-2023-0207
- Vitolla, F., Salvi, A., Raimo, N., Petruzzella, F., & Rubino, M. (2020). The impact on the cost of equity capital in the effects of integrated reporting quality. Business Strategy and the Environment, 29(2), 519-529. https://doi.org/10.1002/bse.2384
- Wang, X.W., Cao, Y.M., & Park, C. (2019). The Relationships Among Community Experience, Community Commitment, Brand Attitude, and Purchase Intention in Social Media. International Journal of Information Management, 49, 475-488. https://doi.org/10.1016/j.ijinfomgt.2019.07.018
- Watanabe, N., Yan, G., & Soebbing, B. (2015). Major League Baseball and Twitter Usage: The Economics of Social Media Use. Journal of Sport Management, 29. https://doi.org/10.1123/jsm.2014-0229
- Xun, J., & Guo, B. (2017). Twitter as Customer’s eWOM: An Empirical Study on Their Impact on Firm Financial Performance. Internet Research, 27(5), 1014-1038. https://doi.org/10.1108/IntR-07-2016-0223
- Zeithaml, V.A., Parasuraman, A., & Berry, L.L. (1985). Problems and Strategies in Services Marketing. Journal of Marketing, 49(2), 33. https://doi.org/10.2307/1251563
- Zhang, M., Guo, L., Hu, M., & Liu, W. (2017). Influence of Customer Engagement with Company Social Networks on Stickiness: Mediating Effect of Customer Value Creation. International Journal Of Information Management, 37(3), 229-240. https://doi.org/10.1016/j.ijinfomgt.2016.04.010
- Zhang, X., Fuehres, H., & Gloor, P.A. (2011). Predicting Stock Market Indicators Through Twitter “I Hope it is not as Bad as I Fear.”. Procedia – Social and Behavioral Sciences, 26, 55-62. https://doi.org/10.1016/j.sbspro.2011.10.562