Research

[1] Accessibility of Social Media Data and Capital Market Quality

While social media platforms are key information intermediaries for investors, they have recently started to restrict access to their data, prompting regulatory concerns about equitable access. This paper explores the effect of this shift on price discovery in financial markets. Leveraging the introduction of substantial fees for automated data access on X/Twitter, which priced out retail investors and smaller institutions, I show that the capital-market reaction to viral events attenuates after these restrictions take effect. Further evidence traces these effects to a compositional shift in trading: the relative share of attention-driven retail trading declines, while trading by institutional investors increases. Critically, these declines are accompanied by lower mispricing and greater price informativeness for affected securities. Overall, I highlight that restricting access to aggregated social media signals improves the extent to which markets price firms’ fundamentals.

Committee: Holger Daske (chair), Eddie Watts, Shawn Shi

[2] Harmonizing the Information Environment: Do Firms Connect Financial and Nonfinancial Reporting?, with Benjamin Tödtmann

Around the world, the demand for corporate nonfinancial information is steadily increasing. In addition, corporate stakeholders require consistency of financial and nonfinancial disclosures. Therefore, we ask whether introducing nonfinancial reporting mandates alters firms’ financial information provision. Using 63 country-level nonfinancial reporting mandates in a global sample of firms, we show that, on average, corporate earnings guidance is reduced in response to these mandates. At the same time, firms increase the average amount of non-earnings guidance. The effects vary with firms’ disclosure incentives. First, when stakeholder pressure is high, firms do not reduce earnings guidance levels and increase non-earnings guidance to a larger extent. Second, firms increase non-earnings guidance levels more when proprietary costs are low. Third, firms providing nonfinancial information before the mandate do not alter their financial guidance. In additional tests, we find that the documented effects are largely driven by environmental, rather than social or governance mandates. The results are robust to using the EU’s NFRD as an alternative shock.

[3] Beyond Content: Investors’ Chatter, Interaction and Earnings Announcement Returns, with Johannes Gaul and Thomas Steffen

We study the relationship between investors’ social media activity and earnings announcement returns. To distinguish between information contained in peer-to-peer interaction and user-posted content, we analyze conversation networks on Reddit using centrality metrics from network science and classify user sentiment with large language models. We show that pre-announcement sentiment is positively associated with short-term cumulative abnormal returns only if it does not spark pre-announcement controversy. If pre-announcement controversy arises, we document a negative association. Our findings present a more nuanced view on the wisdom of crowds hypothesis, highlighting that peer-to-peer interaction on social media exhibits a pattern of normalization, and thus contains informational value beyond content.

[4] Adding Insight to Injury: Curbing Excessive Risk-Taking Among Top Professionals, with Holger Daske and Christian Friedrich

We study whether observing peers’ adverse risk-taking consequences reduces top professionals’ excessive risk-taking. More specifically, we use data from the National Football League, allowing us to study how observing the injury of a former teammate affects distinct proxies for the focal players’ risk-taking and subsequent performance. Our findings suggest that salient adverse peer events immediately reduce individuals’ risktaking, and the effect dissipates after two weeks. While risk-taking generally improves performance among football players, the reduced risk-taking has no negative performance effects, suggesting the reduction of excessive risks. We provide complementary evidence that the saliency channel is muted by extreme monetary incentives and affects longer-term outcomes.

[5] Materiality Mismatches: The Adverse Consequences of Sustainability Frameworks, with Eddie Watts and Shawn Shi

[6] In Good Times and in Bad? Information Acquisition in SMEs, with Thomas Simon

[7] AI Content Restrictions and Price Informativeness, with Chuck Downing