ESG Incidents and Firms' Response on Social Media

Abstract

<p>This paper examines whether, when and how firms respond to negative ESG incidents on social media. Based on the analysis of Twitter posts from S&P 500 firms and Top 500 brands, we find that firms did not tweet more, but their tweets received more user engagements in the days following the incidents. The effect is more pronounced when the incidents are more severe and widespread, among firms which are more exposed to risk such as climate change, and during the period when ESG attracts greater attention. The effect is also stronger for firms in consumer-oriented industries, when firms are active on Twitter and attract higher user engagement prior to the ESG incidents. We also observe a spillover effect among peer firms within the same industry. Furthermore, textual analysis of tweet contents reveals diverse response strategies employed by firms. Our study provides insights into public relations and brand management strategies.</p>