“Will They Merge?” – Financial Event-Related Information Processing in Social Media

A merger is a complex process and for investors it represents a situation of uncertainty on many levels. Investors may engage in online information exchange in order to reduce informational uncertainty. Social media can facilitate effective information exchange among investors. Drawing on the concepts of information processing and sense-making, I investigate information processing activities on blogs related to merger-related uncertainty. Furthermore, I investigate information generation, information depth, and the variety of information provided by blogs related to the completion likelihood of a merger. The analysis shows that financial event-related uncertainty can be related to information processing activities in social media

DRIVERS OF INFORMATION QUANTITY: THE CASE OF MERGER-ACQUISITION EVENTS

Business and research likewise acknowledge the potential and economic value of information exchange in social media (i.e. the quality and the quantity of user-generated content). While existing research has mainly focused on the analysis of the impact of online information exchange, little attention has been devoted to the drivers of information exchange in social media related to major business events. In this study we explore drivers of information exchange relating to such events. In the context of merger-acquisition events, we posit that firm visibility based on firm characteristics and information needs triggered by the event itself influence the information quantity generated in social media. We test these hypotheses using a rich data set that includes a wide range of social media types and platforms. Our results show that both firm visibility and information needs are driving information quantity in social media in the context of corporate actions. Both of these driving factors are highly significant in explaining the information quantity in social media

DRIVERS OF INFORMATION QUANTITY: THE CASE OF MERGER-ACQUISITION EVENTS

Abstrac

An Empirical Analysis of Merger-Related Blog Posts

Financial blogs are maintained by individuals (investors) in order to share information and opinions about financial topics and events, such as merger attempts. A merger attempt represents a situation of uncertainty for investors, because a lot of merger attempts are unsuccessful. Using a computer-assisted approach for content analysis of textual data, this study aims to explore if blog posts reflect the uncertainty concerning the final result of a merger attempt during the time period between the public announcement of a merger and the date of completion/withdrawal of a merger attempt. The results provide evidence that blog posts that are related to a failed merger attempt reflect more uncertainty, show less optimism, and reflect more signs of failure compared to successful merger attempts. This shows that information exchange in social media can serve as an indicator for other financial phenomena besides capital market reactions

How “good” is bad News? Exploring Sentiments of Corporate Disclosures

To satisfy legal requirements, listed companies are required to continuously publish a wide range of disclosures and reports.Regulatory authorities such as the SEC in the US or the FSA in the UK have developed a complex set of rules andregulations that aim at expanding transparency of capital markets. Therefore, corporations hire professional editorial teams,often being supported by financial service communication consultancies. While the regulatory objective is to increasetransparency, the management has an inherent motivation to give the reports a positive spin. We aim to explore this conflictby analyzing the sentiment of corporate disclosures and to compare this tone with the price reactions following thedisclosures’ publication. On the basis of an empirical analysis of intraday stock price reactions and word lists which providemeans to assess the tone of documents, our results provide evidence that corporates follow a strategy to positively adjust theirexternal reporting