Are Managers Listening to Twitter? Evidence from Mergers & Acquisitions

This paper studies the feedback effects of social media on corporate investment decisions. Using a comprehensive sample of millions of tweets from a popular social media network, I show that negative social media feedback around the announcement of a corporate acquisition increases the likelihood that the M&A deal is subsequently withdrawn, especially when the relevant tweets have a higher prominence and visibility, and when the acquiring firm’s stock has low price informativeness. This effect is not subsumed by the announcement returns of the acquiring and target firm or the reaction to the M&A announcement in traditional news media. Managers use feedback from social media as a substitute for other sources of information to help guide their investment decisions.