Using a sample of S&P 500 firms over the period 2012–2014 and Twitter data, I investigate the effect of social media disclosure on financial analysts as information intermediaries. On one hand, social media is a low-cost mechanism for direct communications from the firm to its investors, so may substitute for information intermediation by analysts. On the other hand, following Mosaic theory (Pozen, 2005), analysts (i.e., the crowd of the experts) have a comparative advantage at placing relevant pieces of information into the broader mosaic, implying that the importance of analysts as information intermediaries may increase with the volume of tweets released by the firm and by the crowd of “the public”. I find firms’ financial tweets are associated with larger analyst following and lower analyst forecast error. This finding is consistent with analysts using social media information as a complement to other information sources, providing richer analyses to investors. I also find that the market reaction to analysts' forecast revisions varies positively with the level of social media activity. Together, these findings suggest that social media disclosure serves as a complement to information processing by analysts, as opposed to a substitute. This paper contributes to the literature on financial analysts by providing evidence that even in the era of social media disclosure, the role of analysts as information intermediaries remains important for the efficient functioning of capital markets. It also contributes to the literature on the impact of social media on capital markets by providing a deeper understanding of the impact of unregulated and unstructured disclosure on the general information environment of financial markets.
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