Is Blog Value Relevant? Insights from Cheap Talk

Abstract

Word of Mouth (WOM) has been widely considered as a major driver behind the consumer adoption and diffusion of new products and services because online reviews have become a major information source for consumers to access a product's quality information. In this paper, we hypothesize that compared to the traditional media exposures, blogs can serve as a major information source for consumers to assess the intrinsic valuation of a company. Using data collected from Blogpulse, this study empirically shows that after controlling the traditional media visibility, a firm's visibility in the blog space is positively associated with its capital market valuation and trading volume. Blogs could achieve their credibility through renegotiation. Over all, we draw the conclusion that on average any publicity is good visibility. And we call upon SEC to pay special attention to this information media and enforce the necessary rules to regulate this information channel.