Submit your papersSubmit Now
For Enquiries: [email protected]
IIARD LogoIIARD

Behavioral Corporate Finance in Digital Age, Effect of Social Media Trends on Corporate Finance Decision

Page, Ubesie Madubuko Cyril, Ndu Ndu Ogbonnaya, Odenigbo Bonaventure

Abstract

This study examines the effect of social media trends on corporate financial decision-making within the context of behavioral corporate finance in the digital age. Drawing on case studies such as meme stock phenomena (e.g., GameStop and AMC) and viral ESG movements, as well as empirical market data, the research investigates how social media-driven sentiment significantly influences key financial decisions, including investment choices, capital structure adjustments, and dividend policies. Data were analysed using descriptive statistics. The analysis of data was carried out using descriptive statistics while hypotheses were tested using Ordinal Linear-by –Linear Association model (Log-Linear Regression Model). The findings reveal that companies are increasingly sensitive to the behaviors and expectations expressed by online investor communities, leading to strategic financial actions that often diverge from traditional rational finance models. Social media platforms, through rapid information dissemination and emotional engagement, have emerged as critical forces shaping corporate financial behavior. The study concludes that the digital age has fundamentally altered the corporate financial landscape, making real-time sentiment monitoring and strategic social media engagement essential components of modern financial management. Firms that effectively integrate social media insights into their financial strategies are better positioned to leverage market opportunities, mitigate risks, and sustain investor trust amid heightened market volatility. This research underscores the need for corporate finance managers to recognize and adapt to the behavioral influences of digital-era investors, offering valuable implications for future financial planning, investor relations, and corporate governance practices in an increasingly sentiment-driven financial environment.

Keywords

social mediadigital agecorporate decisionssegmentationsocial networking

References

Abbasi, A., Sarker, S., & Chiang, R. H. (2016). Big data research in information systems: Toward an inclusive research agenda. Journal of the Association for Information Systems, 17(2). Abrahams, A. S., Jiao, J., Wang, G. A., & Fan, W. (2012). Vehicle defect discovery from social media. Decision Support Systems, 54(1), 87–97. Agarwal, V., Green, T. C., & Ren, H. (2023). Social media and corporate financial policies. Journal of Financial Economics, 148(1), 203-225. Agarwal, V., Green, T. C., & Ren, H. (2023). Social media and corporate financial policies. Journal of Financial Economics, 148(1), 203–225. Ainin, S., Parveen, F., Moghavvemi, S., Jaafar, N. I., & Mohd Shuib, N. L. (2015). Factors influencing the use of social media by SMEs and its performance outcomes. Industrial Management & Data Systems, 115(3), 570–588. Aladwani, A. M. (2014). Gravitating towards Facebook (GoToFB): What it is? and How can it be measured? Computers in Human Behavior, 33, 270–278. Aral, S., Dellarocas, C., & Godes, D. (2013). Introduction to the Special Issue —Social Media and Business Transformation: A Framework for Research. Information Systems Research, 24(1), 3–13. Aria, M., & Cuccurullo, C. (2017). bibliometrix: An R-tool for comprehensive science mapping analysis. Journal of Informetrics, 11(4), 959-975. Aronson, E., Wilson, T.D., & Akert, A.M. (2007). Social Psychology. 6th Ed. Upper Saddle River, NJ: Pearson Prentice Hall. Ashurst, C., Freer, A., Ekdahl, J., & Gibbons, C. (2012). Exploring IT-enabled innovation: A new paradigm?. International Journal of Information Management, 32(4), 326-336. Baft, R.L. & Lengel R.H. (1984). Information richness: a new approach to managerial behavior and organizational design. Research in Organizational Behavior. Cummings L.L. and Staw B.M. (Eds.), Vol. 6. Homewood, IL: JAI Press, 1984, p. 191-233. Baker, M., Wurgler, J., & Yuan, K. (2022). Global behavioral biases in corporate finance. Review of Financial Studies, 35(4), 1895-1932. Barber, B., De Long, J. B., & Straub, R. (2023). Finfluencers and retail investor behavior. Journal of Finance, 78(2), 987-1021. Bilani, E., Salimi, D., Jouyandeh, M., Tavasoli, K & Wong, W. (2019). A trend study on the impact of social media in decision making. International Journal of Data and Network Science, 3(3), 201-222. Brosina, K. (2021). Digital revolution: How Social Media Shaped the 2019 Hong Kong Protests. Available at: https://www.ispionline.it/en/pubblicazione/digital-revolution- how-social-media-shaped-2019-hong-kongprotests-30756 accesed on 25.3.2022. Brzozowski, M. J. (2009, May). WaterCooler: exploring an organization through enterprise social media. In Proceedings of the ACM 2009 international conference on Supporting group work (pp. 219-228). ACM. Bulmer, D. & DiMauro, V. (2011). 2nd Annual New Symbiosis of Professional Networks study. Cain, J., & Policastri, A. (2011). Using Facebook as an Informal Learning Environment. American Journal of Pharmaceutical Education, 75(10), 207. Carim, L., & Warwick, C. (2013). Use of social media for corporate communications by research-funding organisations in the UK. Public Relations Review, 39(5), 521–525. Chen, H., & Hwang, J. (2023). Twitter sentiment and stock market anomalies. Journal of Financial Markets, 64, 101-125. Culnan, M. J., McHugh, P. J., & Zubillaga, J. I. (2010). How large US companies can use Twitter and other social media to gain business value. MIS Quarterly Executive, 9(4). Dahnil, M. I., Marzuki, K. M., Langgat, J., & Fabeil, N. F. (2014). Factors Influencing SMEs Adoption of Social Media Marketing. Procedia - Social and Behavioral Sciences, 148, 119–126. Davenport, T. H., Barth, P. F. P., & Bean, R. (2012). How ‘Big Data’ is Different FALL 2012. DellaVigna, S., & Pollet, J. (2023). CEO attention and social media-driven investment. American Economic Review, 113(5), 1432-1460 Dong, J. Q., & Wu, W. (2015). Business value of social media technologies: Evidence from online user innovation communities. The Journal of Strategic Information Systems, 24(2), 113–127. Du, S., & Vieira, E. T. (2012). Striving for Legitimacy through Corporate Social Responsibility: Insights from Oil Companies. Journal of Business Ethics, 110(4), 413–427. Evans, C. (2014). Twitter for teaching: Can social media be used to enhance the process of learning? British Journal of Educational Technology, 45(5), 902–915. Felix, R., Rauschnabel, P. A., & Hinsch, C. (2017). Elements of strategic social media marketing: A holistic framework. Journal of Business Research, 70, 118–126. Ferrara, E., De Meo, P., Fiumara, G., & Baumgartner, R. (2014). Web data extraction, applications and techniques: A survey. Knowledge-Based Systems, 70, 301–323. Foley, S., Karlsen, J. R., & Tåg, J. (2023). Meme stocks and market efficiency. Journal of Corporate Finance, 78, 102-118. Gamboa, A. M., & Gonçalves, H. M. (2014). Customer loyalty through social networks: Lessons from Zara on Facebook. Business Horizons, 57(6), 709–717. Gider, J., Hackethal, A., & Walz, U. (2023). Behavioral biases in corporate financial decisions. Management Science, 69(4), 2105-2128 Gonçalves Curty, R. (2013). Website features that gave rise to social commerce: a historical analysis. Electronic Commerce Research and Applications, 12(4), 260–279. Gössling, S. (2017). Tourism, information technologies and sustainability: an exploratory review. Journal of Sustainable Tourism, 25(7), 1024–1041. Grégoire, Y., Salle, A., & Tripp, T. M. (2015). Managing social media crises with your customers: The good, the bad, and the ugly. Business Horizons, 58(2), 173–182. Hendershott, T., Livdan, D., & Schürhoff, N. (2023). Algorithmic sentiment analysis and market reactions. Review of Financial Studies, 36(3), 1120-1155 Hendershott, T., Livdan, D., & Schürhoff, N. (2023). Algorithmic sentiment analysis and market reactions. Review of Financial Studies, 36(3), 1120–1155. Hong, H., Kubik, J. D., & Stein, J. C. (2023). Social media and ESG investing trends. Journal of Financial Economics, 147(2), 401-430 Kumar, A., Page, J., & Spalt, O. (2023). Digital attention and corporate investment. Journal of Financial and Quantitative Analysis, 58(1), 1-32 Li, X., Ruan, X., & Zhang, Y. (2023). AI and corporate finance decision-making. Journal of Accounting Research, 61(2), 567-602. SEC. (2023). Regulatory guidance on social media and financial disclosures. Securities and Exchange Commission Report Shiller, R. J. (2023). Narrative economics in the digital age. American Economic Review, 113(4), 967-990. Shiller, R. J. (2023). Narrative economics in the digital age. American Economic Review, 113(4), 967–990. Thaler, R. H. (2023). Nudging investors toward rational behavior. Journal of Economic Perspectives, 37(1), 123-142.

More Articles from INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT

Bridging Legal, Financial, and Data Governance in Enterprise AI: Emerging Trends

Author: Funmilayo Ashore-Onisemo, Ebehiremen Faith Iziduh, Uchechi Mary-Linda Unamma, Ifeanyichukwu Jeffrey Okwesa

Macroeconomic Policies and Economic Stability in Nigeria

Author: Abel-Tariah Emmanuel Onate, Okon, Ekanem Nsikhe, Nwenyi Francis Onwe

Determinants of Bank Liquidity in Nigeria

Author: Nelson Johnny Ebifemo-ere Stephen