ASX-listed businesses face a dilemma when it comes to engaging with shareholders via social media, according to QUT research.
Lead researcher Professor Ellie Chapple, from QUT Business School, said public companies needed to find a balance between financial reporting through social media channels and engaging with investors.
Nearly three-quarters of Australian listed companies use or are planning to use social media.
“For public companies social media can be a significant challenge,” Professor Chapple said.
“On one hand they should welcome a new way to engage current shareholders and appeal to potential shareholders. But on the other, they need to obey corporate disclosure requirements.
“In Australia we have some of the strictest corporate reporting regulations in the world but there is no clear guidance around financial reporting on social media.”
Australian companies are required to immediately inform the ASX of information that could affect its share price, and publically respond to rumours from external sources.
But Professor Chapple said the “instantaneous and uncontrolled” information on social media could catch companies out.
Professor Chapple said details of a 2012 takeover bid for David Jones, later found to be a ‘hoax’, spread on social media which saw the share price spike before the company had announced details to ASX.
And in the US, a fake news report posted on Twitter that suggested the social media giant was in takeover discussions briefly added $1.3 billion to the company’s value.
“Twitter can be particularly dangerous because you only have 140 characters,” Professor Chapple said.
“Companies should remember to inform the ASX before tweeting financial information and make sure they include a link to the full statement.
“There is also a temptation on social media to cherry-pick good news but companies must take a balanced approach to ensure they are complying with continuous disclosure requirements.”
Professor Chapple said the advantages outweighed the risks for public companies using social media, provided appropriate guidelines were in place.
“This includes being proactive in monitoring third party accounts and discussion to respond to if needed, and establishing rules for management using their personal accounts to avoid inadvertently releasing material information publically.
“Social media presents challenges for public companies but Australia’s continuous disclosure laws mean our system should be robust enough to cope with them.”
Professor Chapple is researching the impact of social media on corporate reporting with colleagues Professor Kerrie Sadiq and PhD candidate Mr Feng Xiong.
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