Exploring the Use of Emotional Sentiment to Understand Market Response to Unexpected Corporate Pivots

This article investigates the impact of social media sentiment on stock prices in the realm of financial markets. The study builds upon a novel emotional-based lexicon to investigate the transmission between social media and stock market response on a number of recent, pronounced and highly unusual corporate pivots by Eastman Kodak. The novel sentiment measurement techniques used accurately reflect the timeline of corporate announcements and presents clear evidence that social media response to such extraordinary corporate pivots is immediate. The study presents evidence of information flows between Kodak’s share price and sentiment expressed on social media, with excitement imposing the largest effect on Kodak prices in the price discovery process. However, when focusing on the frightening emotions included within the developed methodological analysis, anxiety, panic, and revulsion were particularly pronounced, indicating a strong negative social media response. However, the study also highlights the potential for market-wide volatility and systemic risk if a large number of investors are exposed to the same questionable information simultaneously. The study’s results underscore the importance of legal and regulatory compliance in corporate governance and highlight the need for policy decisions related to corporate governance, transparency, and accountability, promoting a more stable and trustworthy financial system.