Abstract:
We propose the visual attention hypothesis, that visuals in firm earnings announcements increase attention to the earnings news. We find that visuals in firm Twitter earnings announcements are associated with greater follower engagement with the announcement (retweets and likes). Consistent with attention spillover, visuals in one earnings announcement tweet are associated with retweets and likes of another earnings announcement tweet. Consistent with managerial opportunism, firms are more likely to use visuals in their earnings tweets when earnings exceed analyst consensus expectations and are less persistent. Consistent with visuals increasing investor attention, the initial return response to earnings news is stronger and the post-announcement response lower when visuals are used. Our evidence of a post-announcement return reversal indicates that visuals can be a double-edged sword. Furthermore, the higher ERC from visuals is more pronounced on days with high investor distraction (when many other firms are also announcing earnings).
