Understanding the Relationship Between Corporate Facebook Pages and Stock Marlet Activity

Abstract

For Fortune 500 companies, social media has become a major form of communication and point of access to reach potential customers, employees, and shareholders. Past studies have outlined the activity of traditional media publications and the effect they have on influencing stock prices. These journal articles, whether positive or negative, have been found to relate to both an increase in trading activity as well as a correlated change in a firm’s stock price. As social media becomes a leading source of media and outlet of conversation, it is important to compare how electronic media relates to traditional media. As firms build social media into marketing and communication strategies it is equally as important to understand the risks and potential issues that may arise. Corporate Facebook pages are a major target for complaints, which companies need to decide how to best manage to maintain target levels of customer satisfaction which can be a driver in financial performance. For this study I have developed a statistical model to analyze the relationship between the number of posts and associated user activity on a Facebook fan page and the performance of a stock price across one fiscal quarter. The results were not able to systematically prove that Facebook activity can be used as a predictor of financial performance. Future studies have the opportunity to build on this research and examine additional factors that may provide insight in the relationship between social media and market activity.