If the Tweet Fits: How Investors Process Financial Information Received via Social Media

ABSTRACT Firms today have several communication channels through which they can disseminate financial information. We investigate potential differences in information processing between a traditional channel, an investor relations website, and a newer communication channel, social media. We document that nonsophisticated investors are more influenced by peripheral cues when receiving information via social media and more influenced by message-related arguments when receiving the information via websites. This difference leads to lower perceptions of management credibility and judgments about the disclosed information. We also document that time spent reviewing financial information is a significant demographic variable when modeling investment judgments and decisions. This idea merits future research given the considerable number of nonsophisticated investors trusting in external sources to provide trading advice.