When Top Executives Start Having a Personal Twitter Account, What Happens to Their Firms?

Executives are becoming increasingly active on social media channels. This paper examines the economic consequences of such behavior for the underlying firms by looking at the personal Twitter activity of S&P 1500 CEOs/CFOs. Personal tweets contain news as well as reports on the executive’s day-to-day activities, current interests, and mood. We provide evidence that, on the upside, personal tweets can increase investor awareness and improve stock market liquidity. On the downside, tweets can sometimes incite naive stock market reactions, thereby destabilizing prices. The SEC’s “embracement of social media” in April 2013 appears to have increased the “upside-effects”, while decreasing the “downside-effect”.