From Friends to Filings? Social Connectedness and the Demand for Public Information

Exploiting social network data from Facebook, we show that investors acquire more publicly disclosed information about firms located in counties that are more socially connected to their home counties. Using significant information events as shocks to private communication within social networks, we find that this relation is stronger in the weeks leading up to these events, consistent with private communication via social networks stimulating investors’ demand for public information. The relation is also stronger when there is greater scope for complementarity between private communication and public information. Furthermore, we provide evidence that stock prices respond to earnings announcements more rapidly for firms headquartered in more socially connected counties, suggesting social networks improve price discovery. Overall, our study provides new insights into how social communication shapes investors’ acquisition of public information.