Internet public opinions, response and listed firms' information efficiency

Recently rising internet public opinions have been bringing profound influences to the capital market, as well as new challenges to regulators and listed firms. Using 1, 325 questionnaires collected by regulators, this study empirically tests whether and how listed firms' response to the internet public opinions (hereafter RIPO for short) can affect information efficiency in the capital market. This study document that public opinion crisis results in current-year stock price crash and reproduction from the we-media will magnify the negative effect to the stock price, but firms that emphasize and invest more in the RIPO can decrease the negative effect. Listed firms can spread the firm-specific information to the capital market to lower the stock price synchronicity and the probability or magnitude of future stock price crash by emphasizing and investing in the RIPO. The conclusions we draw from this study show that RIPO can increase the information efficiency in the capital market, RIPO is not a beauty-show project, but play a pragmatic role in the capital market. This study also shows practical significance to perfect the information management system and improve the transparency of the capital markets.