An exploration of social media and corporate performance

• Date: 01 July 2020
• Published date: 01 July 2020
• Author: David F. Salerno,John A. Ruddy,Nathan H. Jeppson
• DOI: http://doi.org/10.1002/jcaf.22422

EDITORIAL REVIEW

An exploration of social media and corporate performance

Nathan H. Jeppson

1

| John A. Ruddy

2

| David F. Salerno

3

1

Woodbury School of Business, Utah Valley University, Orem, Utah

2

Economics and Finance Department, University of Scranton, The Kania School of Management, Scranton, Pennsylvania

3

Accounting Department, University of Scranton, The Kania School of Management, Scranton, Pennsylvania

Correspondence

Nathan H. Jeppson, Woodbury School of Business, Utah Valley University, Orem, UT.

Email: nathan.jeppson@uvu.edu

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.

Gruner,Vomberg,Homburg,andLukas(2019)find

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 “scorecards”for 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;31:197–205. wileyonlinelibrary.com/journal/jcaf © 2019 Wiley Periodicals, Inc. 197