Social Medias as a Disclosure Outlet and its Effect on Information Asymmetry: Empirical evidence from companies listed on the Stockholm stock exchange

Abstract: Background and problem discussion: Social media has emerged as a new disclosure outlet and many firms have adopted social media channels such as Twitter and Facebook (Du and Jiang, 2015; Zhou et al., 2015). These channels are different from other disclosure outlets as they are timelier and more easily accessible (Saxton, 2012). Moreover, they allow for an interaction between firms and the financial community which investors have expressed a wish for (von Alberti-Alhtaybat and Al-Htaybat, 2016). Recent research suggests social media disclosures to have an impact on information asymmetry but as it is a new phenomenon it can be discussed whether firms’ engagement is consistent enough to affect information asymmetry (Blankespoor et al., 2014; Prokofieva, 2015; Xu and Zhang, 2013). Purpose: The purpose of this study is to explore the current status of usage of multiple social media channels as disclosure outlets and investigate which effect social media disclosures have on the level of information asymmetry. Methodology: The applied method is an event study investigating disclosures made on social media channels by Large Cap companies listed on the Stockholm Stock Exchange. Events are defined as the annual report announcements of the sample firms and disclosures investigated are those relating to the annual report announcements during 2014-2016. Results and conclusions: Social media disclosures are not found to have an effect on the level of information asymmetry among Large Cap firms listed on the Stockholm Stock Exchange. The phenomenon of using social media as disclosure outlets is not considered widespread in Sweden and firms are found to be inconsistent in their engagement in social media disclosures. This inconsistency limits investors from using social media as a trusted source of financial information which may be a reason for the withheld beneficial outcomes of social media disclosures. This study contributes by describing the current status of usage of multiple social media channels and providing empirical evidence on the effect on information asymmetry when firms use multiple social media channels as disclosure outlets. Furthermore, it adds to recent research by analyzing the social media disclosures in a Swedish context.