Social Media Use and the Director Labor Market: Evidence from Twitter

Abstract

Social media networks allow information to spread faster and more broadly than traditional networks, thereby reducing information frictions in the labor market. However, social media networks are not as personable as traditional networks and can thus introduce frictions to the labor market. To explore the labor market consequences of social media use, we study the labor market outcomes of directors who use Twitter. Specifically, we identify directors in S&P 1500 firms who are active on Twitter and based on their account creation date, examine the relation between being on Twitter and director labor market outcomes. We find directors on Twitter are more likely to gain an additional directorship, a larger directorship and a directorship in a new industry in a given year than those who are not on Twitter. These results hold when controlling for time invariant unobserved director characteristics and are strongest for female or minority directors. Shareholders show more support for these directors through a greater (lesser) percentage of votes casts “For” (“Against”) their election and through a greater stock price reaction to the announcement of first time director appointments. These results suggest that social media can play an important role in reducing traditional labor market frictions.