Financial Returns to Firms’ Communication Actions on Firm-Initiated Social Media: Evidence from Facebook Business Pages

Our paper shows that firm-initiated social media can contribute significantly to the value of firms. The findings provide a rationale for firms to invest heavily in their social media while countering those who question the value of social media. Using a sample of 63 South Korean firms across industries over a three-year period, we find that a firm’s social media actions yield significant financial returns, and the magnitude of these financial returns depends on the types of communication actions: that is, a firm’s (broadcasted) posts versus its responses to customer messages. Our conceptual framework and empirical methodology can help firms more accurately gauge the ROI of their social media investments and tailor their efforts accordingly. Specifically, our results suggest that promptly responding to customer complaints is a key to increasing customer satisfaction and firm performance. Taken together, our study provides guidance for firms on how to optimize their social media strategies to extract greater value from social media.