Professor Giulia Redigolo will present the paper “Social Media Disclosure and Reputational Damage: Evidence from the LIBOR scandal”.
We provide new evidence on the effects of social media in the context of a financial scandal
using a sample of banks that were accused of manipulating the London Interbank Offered
Rate. We find that increased banks’ Twitter activity when the scandal surfaced has a
positive moderating effect on returns. However, the dissemination of content operated by
social media users has a negative counterbalancing effect, thus amplifying the impact of
the scandal. In addition, tweets that are characterized by a positive sentiment exacerbate
the reputational damage suffered by banks. We contribute to the growing literature on
the impact of social media on capital markets.