The value-relevance of social media activity of Finnish listed companies

• DOI: https://doi.org/10.1108/IJAIM-04-2021-0076
• Published date: 25 March 2022
• Date: 25 March 2022
• Pages: 301-323
• Subject Matter: Accounting & finance,Accounting/accountancy,Accounting methods/systems
• Author: Antti Rautiainen,Jonna Jokinen

The value-relevance of social

media activity of Finnish

listed companies

Antti Rautiainen

School of Business and Economics,

University of Jyväskylä, Jyväskylä, Finland, and

Jonna Jokinen

KPMG Finland, Jyväskylä, Finland

Abstract

Purpose –The use of socialmedia tools by companies is common, but the linksbetween the use of multiple

social media tools by companiesand stock price changes are largely unknown. Therefore, this study aims to

analyze the value-relevanceof social media activities on Facebook (FB), Instagram (IG),LinkedIn (LI), Twitter

(TW) and YouTube(YT).

Design/methodology/approach –Stock market data and hand-pickedsocial media data in this study

were collected from Finland, a small language area with consistent International Financial Reporting

Standards (IFRS) reporting practices,in the expectation of better comparability and lower noise in the data.

This study uses correlation, regression and factor analyses for a sample of 105 Finnish public limited

companieslisted on the Nasdaq Helsinki stock exchange.

Findings –This paper f‌inds evidencethat social media activity is an important areaof analysis and that the

activityand popularity of a company in social media are value-relevant variablesin forecasting stock prices.

Practical implications –Not all social media activities are necessarilyequally important for managers

and investors.Focus on visual messages in social media is recommended.

Originality/value –The f‌indingsof this study highlight the value-relevance of usingmultiple visual social

media channels, particularlyIG and YT. This paper suggests avenues for future research andfor analyzing

social mediainformation.

Keywords Social media, Value-relevance, Accounting, Stock prices, Finland

Paper type Research paper

Introduction

The value-relevance of informationdisclosed, managed and communicated through various

channels is a topic of interest in accounting and information research (Blankespoor, 2018;

Isaboke and Chen, 2019;Lev, 2019). Social media are increasingly used for communicating

information and social media activitiesresemble investments in marketing that are made to

have a positive impact on a f‌irm’s reputation via the so-called electronic wordof mouth (eWOM,

© Antti Rautiainen and Jonna Jokinen. Published by Emerald Publishing Limited. This article is

published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce,

distribute, translate and create derivative works of this article (for both commercial and non-

commercial purposes), subject to full attribution to the original publication and authors. The full

terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode

The authors would like to thank the anonymous reviewers for their valuable and constructive

comments. Further, the authors thank for the comments received for earlier versions of this paper,

e.g. in workshops and seminars.

Value-

relevance of

social media

activity

301

Received8 April 2021

Revised27 August 2021

29October 2021

28December 2021

1 February2022

Accepted12 February 2022

InternationalJournal of

Accounting& Information

Management

Vol.30 No. 2, 2022

pp. 301-323

EmeraldPublishing Limited

1834-7649

DOI 10.1108/IJAIM-04-2021-0076

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/1834-7649.htm

see Xun and Guo, 2017). Positive sentiments related to the company may in turn inf‌luence

customer behavior or loyalty (Laroche et al.,2013) and affect f‌irm performance and eventually

also stock prices (Lev, 2019;Seggie et al., 2007). Recently, for example, the positive sentiment in

Twitter (TW) has been found as being positively related to sto ck returns (Duz Tan and Tas,

2021). The social media f‌ield is versatile, however, and the value-relevance of the different social

media tools, when used together with other tools, is not clear, although some positive effects as a

consequence of disseminating information through social media have been observed (Bartov

et al.,2018;Blankespoor et al.,2014;Xun and Guo, 2017). In this paper, we analyze the value-

relevance of multiple social media tools to ascertain whether appearances in Facebook (FB),

Instagram (IG), LinkedIn (LI), TW and YouTube (YT) help explain stock price change in the

Finnish context. Appearing on social media is relatively common for companies, but theimpacts

of the company being active (level of activity, e.g. the number of YT videos made) or popular

(being liked, the number of followers or likers, etc.) in social media, especially the possible links

between activity or popularity in social media tools and stock returns, are largely unknown.

Currently, legal and also voluntary information is conveyed to stakeholders largely on

the internet, and many companies also engage in social media activity, such as sharing

news, posts and videosand commenting on current events (Gilfoil and Jobs, 2012).However,

the impacts of disclosing such voluntary information on f‌irm value have not yet received

much study. Further, there may be differencesin the value-relevance of using various social

media channels as well as country-specif‌icdifferences in how the sentiment of social media

discussions becomeref‌lected in stock prices. Our research questions are:

RQ1. How is the level of social media activitylinked to stock price change in the Finnish

context?

RQ2. How is the popularity of thecompany in social media linked to stock price change

in the Finnish context?

RQ3. How is the sentiment in social media about the company linked to stock price

change in the Finnish context?

Next, we present theoretical viewpoints and discuss the possible linkages related to value-

relevance and social media. Social media activity is interpreted as how much content the

organization has published. Popularity of the company is measured, e.g. by how many followers

the social media prof‌iles of the company receive. The sentiment (e.g. positive or negative) in the

social media channels in general is measured by a commercial program called M-adaptive. The

stock price change percentage is measured during the year 2018, which is considered to be a

relatively typical year in a period when Finnish companies had already been adopting social

media. In the empirical section, we study the research questions related to FB, IG, LI, TW and

YT. The Finnish sample includes 105 companies from the main list of the Nasdaq Helsinki stock

exchange, and control variables include the typical f‌inancial ratios portraying prof‌itability,

liquidity and f‌inancial solvency, as well as beta as a risk measure. We f‌ind that social media

activity is not only a useful area of analysis but a key factor in predicting stock price changes. In

particular, we f‌ind the value-relevance of IG followers, TW followers and the number of YT

videos released by the company [see equation (1) and Appendix 1–6]. Further, in the discussion

and conclusions section, we suggest avenues for future research.

Value-relevance and social media

Value-relevance,in a corporate context, signals that something affects the shareprices of the

corporation and can be used for predicting future shareprices (Amir, 1993;Barth et al.,2001;

Lev, 2019). Barth et al. (2001) note that“an accounting amount is def‌ined as value relevant if

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