Do Social Media Influence CEOs’ Strategic Decisions? CEOs’ Twitter Activity and Subsequent M&As

Abstract

Social media have introduced entirely new ways in which CEOs can communicate; however, our understanding of the impacts of social media communication on CEOs and their decisions has remained limited. I argue that CEOs' social media activity increases their confidence, risk-taking, and M&A activity and decreases their organic growth expenditure. I argue that social media activity can be confusing for external stakeholders, resulting in less favorable market reactions to this increased M&A behavior. I test my theory using the M&A activity of a sample of CEOs from S&P1500. I found that CEOs who are active on Twitter engage in 800 million dollars more expensive deals than before they joined. This effect increases by 1 million dollars for every ten extra tweets. For every thousand tweets, investors’ reactions to this increased M&A activity is one percent less positive. I discuss the implications for the literature on M&A and CEO social media communication.