Social Media Disclosure of Political Ideology
Abstract
While theory suggests that firms should remain silent on divisive sociopolitical issues due to uncertain investor reactions (Bond and Zeng 2022), we document that nearly 30% of S&P 1500 firms publicly express support for the Black Lives Matter (BLM) movement on Twitter. This disclosure is positively associated with proxies for the management team’s liberal ideology. We provide evidence of ideologically driven investor responses to BLM disclosures: liberal-leaning mutual and hedge fund managers exhibit abnormal purchases of BLM-supporting firms, whereas conservative-leaning managers exhibit abnormal sales. Similarly, liberal-leaning depositors increase their holdings of riskless insured deposits at BLM-supporting banks, while conservative-leaning depositors reduce theirs. These shifts occur despite minimal changes in risk or return, highlighting the role of ideological alignment in investment decisions. Our findings imply that managers derive ideological utility from value-consistent disclosure and are willing to bear the cost of investor polarization.