8-K Filings, Twitter Activities and Stock Market Reactions
Twitter has become one of the major channels for information dissemination and communication, which includes companies’ market relevant information. This study investigates how Twitter activities are related to 8-K filings and the corresponding stock price and trading volume reactions. Using a sample of S&P 1500 companies, all 8-K filings are gathered for the calendar year of 2012 and calculate the following three unique Twitter metrics based on the data provided by Topsy, Inc.: abnormal tweeting activities, abnormal sentiment, and network centrality weighted by the influence level of tweeters. The findings show that on average, there are about 32% more tweeting activities around 8-K dates, compared to the benchmark period. In addition, all three Twitter metrics relate positively to both cumulative abnormal returns and cumulative abnormal trading volume in the 3-day window around 8-K filings. Abnormal sentiment and centrality weighted by the influence level of tweeters moderate positively and moderate negatively the association between abnormal tweeting activities and stock market reactions to 8-Ks. These metrics also moderate the relation between different types of 8-Ks and the corresponding stock market reactions. Based on our findings, we conclude that the level and nature of market attention a corporate announcement receives determines the level of price and volume movements of stocks in the capital markets. The study contributes to the literature by suggesting the important role played by social media, Twitter in particular, in the information dissemination process of Form 8-Ks.