The Role of Stock Message Boards in Processing Less Readable Disclosures
Abstract
We use data from HotCopper, Australia's largest stock message board, and exploit its unique announcement-specific thread structure to examine whether investors' accounting-related discussions help process less readable corporate announcements. We find that less readable disclosures, particularly unanticipated nonearnings announcements, generate more accounting-related discussions and are more pronounced for firms with low institutional ownership, limited coverage, and high operational complexity. Market reaction analyses reveal that these discussions are associated with stronger price and volume responses and improve market reactions around less readable announcements, suggesting that social media can function as a low-cost supplement for traditional information intermediaries. Further comparing New Zealand based stock message board, Sharetrader.co.nz, with the absence of announcement-linked threads shows weaker and less consistent effects, underscoring that social media's informativeness in capital markets hinges not just on investor participation but critically on platform design. Our findings contribute to the disclosure processing cost literature by showing that structured forums reduce cognitive frictions and improve market efficiency, especially in retail investor-dominated settings.