The influence of social media usage on the DuPont method of analysis

Abstract In this study, we provide new evidence regarding return on equity and its components for firms recognized for their effective use of social media compared to firms that use social media to a lesser extent. Using the Russell 3000 firms, we compare firms’ return on equity and sub components using difference in means tests and regression analysis. We find that firms recognized for their effective use of social media generate higher return on equity than other firms. Furthermore, when testing the disaggregation components, we find that the increased return on equity exhibited by firms using social media effectively is due to higher asset turnover and lower interest burden. We also find that such firms experience a higher tax burden.