Ideology-Driven Social Media Opinions and Market Responses to Polarizing Boycotts

Abstract

Boycotts triggered by public companies’ practices perceived as ideologically polarizing can lead to negative investor reactions. In this study, I examine how the stock market responds to such boycotts and whether ideology-driven social media discourse shapes this response, given investors’ increasing reliance on social media information for decision-making. On average, polarizing boycotts are associated with a 1% (2.3%) drop in equity value over the 7 (60) trading days after gaining online traction. Immediate price decline is more pronounced when social media discussions are dominated by users ideologically aligned with the boycotters, particularly when their posts attract online engagement, emphasize financial impact, or come from influential, prolific users. I also find modest evidence that return volatility following boycotts increases when the ideological beliefs of social media posters are more diverse. My findings suggest that polarizing boycotts against corporate actions have stock market ramifications, and that ideology-driven social media opinions seem to amplify both price decline and volatility.