Social Impact
It is not just for political rants or Love Island fans. Social media is increasingly being used for Capital Markets communications.
With the unique ability to access and target decision makers, it is no surprise that 97 per cent of institutional investors use digital media sources in their day-to-day activity. In fact, according to the Green Report in 2019, 86 per cent of investors revealed they acted on online content and 63 per cent of investors use social media, compared to less than half who regularly referred to finance-specific trade publications. And this data was before the pandemic – this trend will have significantly increased.
Harnessing the digitalisation of communication effectively can impact your bottom line considerably. There is a marked transition to corporate disclosure on social media and accumulating evidence that disclosure influences share price. For example, analysis of emotional sentiment of Tweets can predict stock returns across a range of time points – the next day, five days, seven days, ten days or twenty days.
Investors use social media as a source of both financial and non-financial information. Effectiveness of corporate communications through social media is linked to Legitimacy theory. Disclosure of information across social media (Twitter and LinkedIn) reduces information asymmetry and addresses market misconceptions. For example, United Nations Sustainable Development Goals (UN SDGs) are material to business and impact. An analysis of the S&P500 identified over 24,000 tweets linking disclosures to the UN SDGs. The findings demonstrated companies disclosing UN SDGs via social media had a higher commitment to external sustainability assurances therefore reinforcing the Legitimacy Theory.
In response to this growing evidence, some buyside institutions - for example, BlackRock - have established dedicated, branded, in-house departments designed to analyse social data.
Communicating effectively with your target audience and knowing how engaged you are with their message is becoming an ever more powerful tool –so, ensure you are effectively influencing investment through the correct use of social media.