The Value of Social Media Anonymity: Evidence from the Stock Market

Abstract

This paper examines the value implications of social media anonymity in a stock market context, exploiting a policy change in China that removes anonymity and requires real-name registration on social media. We find that this policy leads to a significant drop in firm value, especially when investors rely more on social media for information. In terms of the channels, we show that this policy results in poorer information dissemination on stock message boards, lower stock price informativeness and liquidity, higher stock crash risk, poorer corporate disclosure, and more earnings management. Overall, our findings indicate that removing social media anonymity negatively impacts firm value by worsening their information environments.

Presented by Kai Li