From Barack Obama to Rihanna, Taylor Swift to Donald Trump, through the 2010s Twitter was the go-to site for politicians and celebrities to spread their latest news and views.

Quietly, though, Twitter (now X) also became the place where public firms shared earnings news with investors.

“Twitter has a few key advantages to disseminate financial information,” says Hai Lu, professor of accounting at the Rotman School of Management. First is immediacy. The platform’s massive audience (more than 360 million monthly users as of 2022) made it ideal for reaching vast numbers of people quickly. Second is brevity. Its 280-character limit encourages short news bursts. Last is simplicity. Unlike Facebook and other social media sites, Twitter/X doesn’t require photos, videos or other frills to be effective.

“Twitter is easier and cheaper for firms compared to other platforms,” Lu says. “You just write a few words and send it out. It’s a very powerful way to push messages fast, and for financial news that’s important.”

Yet Lu wondered: How were companies sharing earnings news on Twitter? What type of information did they post, and what did they avoid? And did their behaviour change over time?

Available research was limited. Previous studies used data from Twitter’s early days (pre-2013) when public firms were just starting to understand social media. Lu wanted to take a deeper dive. Alongside Richard M. Crowley (Singapore Management University) and Wenli Huang (Hong Kong Polytechnic University), he analyzed 24 million tweets posted by 1,360 firms in the S&P 1500 between 2012 and 2020. (Of note: Elon Musk bought and re-branded the platform in 2022, which was out of scope of the research.)

The results, published in the paper “Discretionary Dissemination on Twitter,” are informative. While an earlier study found companies only tweeted positive earnings news, Lu and his colleagues discovered firms were more likely to tweet both extreme good and extreme bad news around earnings announcements and financial statement filing.

What is “extreme” good and bad news? Lu classifies this as news that leads to an abnormal return in either the bottom or top 20 per cent of a firm’s abnormal return distribution. Public companies were less likely to tweet moderate or neutral (neither good nor bad) financial news.

While firms obviously want to promote positive earnings, Lu says posting bad news offers transparency: They could get ahead of poor results and mitigate shareholder litigation. As for not posting as much moderate news, Lu believes firms may feel such information doesn’t require the immediacy of a social post. “Though I always think that disseminating more information is good for investors,” he adds.

What else did the study find? As Lu suspected, as the years went on, companies became more strategic with their tweets. For example, firms that joined Twitter during the study period of 2012 to 2020 were more likely to tweet on days when they were releasing extreme good or bad news than those that joined Twitter before 2012. Companies were also more likely to tweet in the several hours after earnings announcements and in the hours before and after annual 10-K and quarterly 10-Q filings.

“After a few years on Twitter, firms started to learn how to strategically use it,” Lu says. “And we find this strategic behaviour gets stronger over time in terms of how and when they post positive and negative news.”

It remains to be seen whether, as X, the social platform will continue being the go-to site for sharing earnings news. Many firms fled due to a flood of misinformation and offensive posts. Some have joined Bluesky, an emerging site with Twitter-like features. However, “there is still no other platform that has the same level of influence as Twitter/X,” Lu says. “So we may see a decrease in dissemination of financial and other corporate information on social media as companies walk away from X.”

What can investor relations and communications departments take away from Lu’s study? First, social media is a powerful tool for sharing financial news. Companies can also learn from their posts by monitoring investors’ reactions via likes, retweets and replies. Finally, a robust social media plan around earnings can help firms counter fake news online.

Lu believes tweets can also increase trading activity, which can affect a company’s share price. Though this study did not try to make that link, new research Lu is working on finds tweets from CEOs and CFOs can spur retail trading in a firm’s stock.

Investors, meanwhile, should critically evaluate posts, Lu says. That means reading earnings reports rather than only 280 characters on their phones. “When companies tweet, and the way they tweet, is strategic,” he says. “Investors need to look deeper at the numbers as opposed to just looking at the tweet.”