Social Media and Voluntary Nonfinancial Disclosure: Evidence From Twitter Presence and Corporate Political Disclosure

Abstract

This study uses a sample of 1,316 firm-year observations of S&P 500 companies (2012–2016) to investigate whether and how social media (i.e., Twitter) affects firms’ voluntary nonfinancial disclosure (i.e., corporate political disclosure). Our results show that Twitter-adopting firms are generally more transparent in their disclosure of corporate political contributions and of related policies and board oversight. Moreover, firms with more Twitter followers and firms whose corporate political activities are targeted in more Twitter messages are more transparent in such disclosures. Our cross-sectional analysis suggests that this effect is stronger for firms whose stakeholders are more active on Twitter and firms that are less visible or more reputable. Our results remain robust to different econometric model specifications that address the endogeneity issue, including Heckman two-stage procedure, a difference-in-difference analysis, and controlling for preceding year’s corporate political disclosure transparency. Our results remain qualitatively the same when we control for alternative social media platforms (i.e., Facebook) and non-interactive social media platforms (i.e., blogs and Really Simple Syndication feeds). Taken together, our findings suggest that social media (i.e., Twitter) presence exerts pressure on firms’ voluntary nonfinancial disclosure practices (i.e., corporate political disclosure).