This paper aims to investigate the effect of CEO social media celebrity status on credit ratings and to determine whether potential threats on the CEO celebrity status negatively moderate the above association.
The authors collected tweets for 874 CEOs from 513 unique S&P 1500 firms. A panel data analysis was conducted on a panel with 4,235 observations from 2009 to 2020. We then tested the hypothesis with the ordinal logit model.
The empirical findings confirmed that CEO social media celebrity status is positively associated with corporate credit rating outcomes. Our path analyses revealed that CEOs with higher social media celebrity status have less incentive to conduct risk-taking behaviors and thus benefit credit ratings. When the rating agencies perceive potential threats to CEO celebrity status, including CEO myopia and CEO overconfidence, the association between CEO social media celebrity status and credit rating is weakened.
This study provides an in-depth understanding of CEO social media perception on credit ratings for firms' managers and capital market participants. Findings can help managers and firms improve their strategies for leveraging social media to release credit constraints. The debt market participants could adopt the CEO social media celebrity status and its concerned threats to setting debt contracts with an adequate price.
This is likely to be the first study that examines the effect of CEO social media celebrity status on credit ratings. The findings of this study also reveal that social media certificated celebrity CEOs tend to be capable of enhancing firm revenue and have lower risk-taking incentives, unlike mass media certificated celebrity CEOs.
