Keywords

corporate disclosures, EDGAR, geography, information acquisition, social networks, social connections

Abstract

We show that investors acquire more public information about firms to which they are more socially proximate. On average, a standard deviation increase in the Social Connectedness Index (Bailey et al., 2018) between a firm’s headquarter county and a searcher county is associated with 30% more EDGAR filing downloads from the searcher county. The effect of social proximity on traditional investment research is distinct from the effect of geographic proximity. We find similar results studying headquarter relocations, investor-level data, and EDGAR downloads from European regions, for which physical distance should be irrelevant. Social proximity matters more during times of high market-wide uncertainty and for firms with weaker information environments. Finally, information gathered by socially proximate investors predicts short-term earnings and stock returns, but also heightened volatility. Collectively, the evidence indicates that social networks mitigate informational frictions and foster information acquisition in financial markets.

Original Publication Citation

“Social Networks and Traditional Investment Research: Evidence from Facebook Connections” (with Gerrit Köchling and Peter Limbach)

Document Type

Working Paper

Publication Date

2024

Language

English

College

Marriott School of Business

Department

Accountancy

University Standing at Time of Publication

Associate Professor

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