Abstract
PurposeThe purpose of this paper is to research how corporate communication regarding a specific corporate event (i.e. Tesla’s tweets about a new product) as well as the framing of both the event itself and the market reactions therewith in the news media influence the formation of the share price of the respective company over time. In so doing, the study provides insights into the nature of market-moving information and the role of financial news flows in shaping market reactions in today’s high-frequency news and information environment.Design/methodology/approachUsing a multi-method case study approach, combining quantitative intraday event studies with a qualitative text analysis of financial online news and tweets by Elon Musk and Twitter, the authors shed light on the complex interaction between market events, financial information and stock market reactions. The analysis covers a period of four days, encompassing the announcement and introduction of the new battery pack for Model S and X by Tesla as well as the accompanying and follow-up reporting by the financial news media.FindingsFindings show that market reactions are driven by business events and expectations among the market rather than the follow-up reporting by financial news media. Financial online news instead seems to heavily rely on Elon Musk’s attention-triggering news to sustain its 24-h airtime with a variety of reporting tools, keeping the highly demanded audience engaged. Eventually, Twitter accounts of media visible companies and personalities, such as Tesla and its CEO Elon Musk, have been found to be useful market information sources for day traders and shareholders to trade at a profit.Originality/valueThe study is a response to recent discussions about the legitimacy of Twitter communication by CEOs or representatives of listed companies. The findings show that Twitter communication needs to be well considered in light of strict market regulations (e.g. SEC in the USA) regarding insider-trading and the publication of market-relevant information. In addition, corporate financial communication should avoid impetuous communication via social media channels as this could have deterrent effects on the market valuation of a listed company.
Highlights
The purpose of this paper is to research how corporate communication regarding a specific corporate event (i.e. Tesla’s tweets about a new product) as well as the framing of both the event itself and the market reactions therewith in the news media influence the formation of the share price of the respective company over time
EST, Elon Musk, the CEO of Tesla, announced on Twitter that there would be a “product announcement at noon California time today.”. Did this tweet generate considerable engagement on Twitter (i.e. 5,251 retweets; 14,330 likes), it caused the Tesla share price to jump 1.4 percent from $223.14 at 11.23 a.m. to 226.37 at 11.30 a.m., with a trading volume of 549,981 shares in that period, which accounted for more than an eighth of the total trading volume on that day for Tesla (4,784,400 shares). It was not clear what the actual product announcement of Tesla would be at that moment, it seemed that investors bid up Tesla’s share price on pure speculation
While investors reacted with the acquisition of Tesla shares immediately, the mainstream financial news outlets started to speculate about possible interpretations of the cryptic announcement by Elon Musk
Summary
The purpose of this paper is to research how corporate communication regarding a specific corporate event (i.e. Tesla’s tweets about a new product) as well as the framing of both the event itself and the market reactions therewith in the news media influence the formation of the share price of the respective company over time. Studies in this research area have not paid attention to the complex dynamics of event-driven news coverage and its effects on stock market prices. It remains unclear how breaking issues can move the market gradually and how various outlets report on the issues over time, affecting investors’ trading-decisions. Such event-driven news coverage increasingly originates in the realm of social media (Bollen et al, 2011). How do financial news flows about corporate events influence the stock market prices of companies over time?
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callMore From: Corporate Communications: An International Journal
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
