Celebrities on Social Media and Their Effect on Shareholder Wealth

This study analyzes the impact that celebrities’ social media posts have on company value. We utilized an event study to monitor abnormal stock returns after a celebrity mentioned a specific firm in a social media post. We investigated cumulative abnormal returns for companies following 24 different social media posts, and compared these values to the companies’ returns from an earlier benchmark period. We used the following event windows to analyze returns: ten days before the event (-10,0), days surrounding the event ranging from the day before to 3 days after (-1,+3), and longer periods including 10 days after (0,+10), one month after (0,+30), nine months after (0,+270), and finally one year after the event (0,+365). Using the same time frames, we further subset our sample by social media platform and compared the returns of Facebook, Twitter, and Instagram posts separately. Our general model found that when a celebrity mentioned a company in a social media post, firm value had an immediate statistically significant positive effect the following day, with an abnormal return. Furthermore, the model found statistically significant abnormal returns 3 days after the event, 270 days later, and again one year later.