On social effects in the spread of corporate bad news

Abstract

Social media has become prominently popular over the recent years. Tens of millions of users login to social media sites such as Twitter to disseminate breaking news and share their opinions and thoughts. For businesses, social media is potentially useful for monitoring the public perception and social reputation of companies and products. Despite such potential, how bad news about a company influences the public sentiments in social media has not been studied in depth. The aim of this study is to assess people’s sentiments expressed on Twitter upon the spread of two types of information: corporate bad news and a CEO’s apology. I attempted to understand how sentiments on corporate bad news propagate on Twitter and whether any social network features facilitate its spread. The Domino’s Pizza crisis in 2009 in the U.S. and the E-Mart crisis in 2010 in South Korea, where bad news spread rapidly through social media followed by an apology from the company, were investigated for this thesis. The results show that bad news spreads faster than other types of information, such as an apology, and sparks a great degree of negative sentiments in the network. However, when users converse about bad news repeatedly, their negative sentiments are softened. Moreover, the CEO’s direct apology on Twitter had clear benefits. Moreover, as expected, an apology on Twitter was more effective to followers than non-followers. However, followers showed more intense changes in both positive and negative sentiments. The results also show that negative sentiments have stronger dynamics than positive sentiments, in terms of the degree of sentiment change. Moreover, I discuss various reactions of users towards the bad news in social media such as negative purchase intent. This thesis provides insights on the potential for efficient crisis communication in online social media and discusses future research agendas.