Tweeting Away Firm Value: How Investors Evaluate CEOs' Use of Social Media
Abstract
This paper examines how investors react to CEOs' personal use of social media and how these reactions affect firm valuation. We theorize two mechanisms: a corporate communication channel, in which work-related tweets enhance transparency and increase firm value, and a CEO distraction channel, in which non-work-related tweets reduce value by signaling distraction or self-promotion. Using a panel of S&P 1500 firms from 2006-2020, covering 248 CEOs and over 250,000 tweets, we find that Tobin's Q rises with work-related tweeting volume but falls with non-work-related tweeting volume. These effects are moderated by information environment, CEO celebrity, and investor horizons. A supplementary survey of professional investors corroborates these mechanisms. Our results highlight social media's dual role as both a communication tool and an agency cost.