Corporate Use of Social Media After ESG Incidents

Despite increasing investments in Environmental, Social, and Governance (ESG) initiatives and practices, firms often fail to meet public expectations, causing ESG incidents. While firms often choose to remain silent after an incident, we argue that this is not attractive to firms anymore on social media platforms, where consumers and stakeholders can freely share information and concerns. That is, firms tend to use official social media accounts to increase communication frequency and communicate with stakeholders about the incidents (i.e., incident-related posts) after the occurrences. We are also interested in the extent to which firms would adjust their use of social media in terms of non-incident-related posts, as the current prevailing practical advice and studies offer contradicting predictions. Using data from different sources, we construct an event-based firm-day dataset and empirically show that firms significantly increase the number of social media posts after ESG incidents. The impact is more salient for firms in consumer-oriented industries and when the incident is more impactful. Using a semi-supervised, dictionary-based approach, we delve into the content of tweets and demonstrate that firms are inclined to increase both the number of incident-related and the number of non-incident-related tweets after an ESG incident. The follow-up analyses at the incident level indicate that firms that post more after an ESG incident experience a better reaction from the capital market, especially for customer-oriented firms or incidents that receive high attention from the traditional media.