The impact of CEO’s social media posts on stock price fluctuations and investor expectations
Description
In finance, an abnormal return is the difference between the actual return of a security and the expected return. Abnormal returns are sometimes triggered by "events." Events can include mergers, dividend announcements, company earning announcements, interest rate increases, lawsuits, or tweets on social networks. Previous research has clearly shown a link between company’s communication through social networks with investors and the prediction of company shares. This research aims to determine how large companies from the USA and Germany and their chief executive officer’s use the social interaction via the social networks Twitter and LinkedIN to affects the company’s abnormal returns and investors’ expectations. This retrospective study aims to investigate the influence of social media namely company’s and CEOs in two different societies that behave differently toward social media. The sample contains data of twenty companies and the tweets of their CEOs over the period of 2021 – 2023. The results show consistent effects of tweeting of CEOs on the abnormal returns. These results apply to opinions that convey authentic opinions that convey direct information about the company's performance, successes, or failures, as well as opinions that disseminate existing information or replicate and are directly related to the company's business strategy. The quantitative technique employed to collect data is data analysis with programming language Python. Regarding the data processing and analysis, the methods include Sentiment analysis, Granger causality tests and event study. This paper concludes that sentiment in CEOs tweets has a direct imapct on stock returns of the same companies, but the effect is very small. Also, the effects of the tweets are reflected equally in USA and Germany, but on the other hand, investors and stock markets in these two countries react differently due to the difference in the perception of social networks, the size of the market or because of themselves events that were investigated. Keywords: Twitter, LinkedIn, social networs, abnormal returns, Granger casualuty test, Pearson correlation, event study.