“Firms have generally relied on information intermediaries, such as the press, to disseminate firm-initiated information,” the research study said. “Unfortunately, the press is biased toward coverage of high-visibility firms, as they tend to draw the largest readership base.”
As a result, companies with lower-profiles “do not always reach the public in a broad and efficient manner,” the study said. Twitter, as well as other “direct-access” technologies, including Facebook, have helped narrow that gap. Specifically, using Twitter also has helped companies achieve more market liquidity for their stocks.
“We find that dissemination via Twitter during news event windows is associated with lower bid-ask spreads, greater depths and a higher liquidity ratio after controlling for the information content of the news, the presence of information intermediaries, market conditions and firm-specific characteristics,” the study said.
“This relation is muted, however, for high-visibility firms, which receive broad coverage already,” the study continued. “Overall, these findings indicate that firms use Twitter to disseminate firm-initiated disclosures, and this dissemination helps reduce information asymmetry, particularly for those firms that are arguably most in need.”
The research study was based on tweet data from 2007 through September 2009 for 102 information-technology companies.
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