An exploration of social media and corporate performance

Date01 July 2020
Published date01 July 2020
AuthorDavid F. Salerno,John A. Ruddy,Nathan H. Jeppson
An exploration of social media and corporate performance
Nathan H. Jeppson
| John A. Ruddy
| David F. Salerno
Woodbury School of Business, Utah Valley University, Orem, Utah
Economics and Finance Department, University of Scranton, The Kania School of Management, Scranton, Pennsylvania
Accounting Department, University of Scranton, The Kania School of Management, Scranton, Pennsylvania
Nathan H. Jeppson, Woodbury School of Business, Utah Valley University, Orem, UT.
Firms have been increasing their use of social media for
information dissemination, public disclosures, and to
supplement traditional marketing efforts. Before social
media, firms depended on the press or other means to
release information externally (Bushee & Miller, 2012;
Miller, 2006). However, Blankespoor, Miller, and White
(2014) indicate that, because the press tends to focus
coverage on more visible firms and investors have limited
time and resources, firm disclosures do not always reach
a broad set of investors on a timely basis for most firms.
In fact many firms have developed an understanding that
overlooking opportunities provided by social media poses
a threat to success (Fan & Gordon, 2014).
The literature shows that firms employ social media
in many ways. For example, research shows that many
firms use social media to manage bad news. Jung,
Naughton, Tahoun, and Wang (2018) find that firms
exhibit strategic behavior by disseminating negative firm
news less than they do positive news, and that social
media use is generally associated with firms that have an
increased risk of possible litigation. The study also finds
that when bad news is tweeted and retweeted, negative
press coverage increases.
Lee, Hosanagar, and Nair (2018) study whether the con-
tent of social media advertising influences their customers'
social media engagement. They find that persuasive con-
tent, such as emotional and philanthropic content, has a
positive impact on engagement.That study also finds that
product informative content has a negative impact on user
engagement.This finding suggests that social media savvy
companies will learn to promote their products without dis-
couraging followers continued engagement. One exception
to this finding may be with regard to new product launches.
evidence that promoting new products using social media is
more effective than traditional online marketing strategies.
Additionally, Lee et al. (2018) find that industry category
moderates the relationship between content and follower
engagement, which seems to suggest that perceptive firms
will design a customized social media strategy that is specif-
ically developed for the industry in which they compete.
It is clear from the extant literature that opportunities
exist for firms that choose to engage with social media
strategically. Because social media provides firms' with a
strong link to market participants (Blankespoor et al.,
2014) such as investors and customers, it is reasonable to
expect that firms that are adept at using social media out-
lets will enjoy incremental yet significant measureable
differences in performance. Put another way, profits are
enhanced and perceptions are managed more effectively
to support revenue generation, sales, and profits.
This study is motivated by the expectation that firm
performance, as measured by accounting metrics, is
determined in part by firms' efforts to influence the pub-
lic perception of the company. We examine whether
effective social media user firms present significantly dif-
ferent levels of key accounting metrics than do non-savvy
firms. To study these relationships, we examine several
performance measurements. First, because net income
and sales are scorecardsfor performance, and because
greater effective use of social media enhances marketing
strategies (Kim & Ko, 2012), we investigate whether the
top social medial users demonstrate incremental improve-
ment over their noneffective competitors. Second, we
examine this relationship using several scaled metrics.
Based on findings in existing literature cited above, our
Received: 12 June 2019 Revised: 23 August 2019 Accepted: 7 October 2019
DOI: 10.1002/jcaf.22422
J Corp Acct Fin. 2020;31:197205. © 2019 Wiley Periodicals, Inc. 197

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