The Current Perspective on Social Media

List of Contributors

Metin Kılıç

1 Social Media Use of Companies in Public Disclosure: Potential Risks and a Possible Solution

Introduction

Information and communication technologies have shown incredible development in recent years, influencing all other areas. The current digital transformation seems to be difficult to understand and make sense of when compared with the situation 40–50 years before. We are currently going through a process of change during which we see events resembling plots of science-fiction movies, which we have a hard time comprehending, yet to which we get accustomed easily. The generation emerging after the 2000s express themselves as a virtual generation. Almost all kinds of labor, capital, information, and materials are defined and perceived through virtual values. While a statement or implication given by a company manager through a newspaper article or television created sudden changes in stock values or an article or statements written by a head of state caused international crises a few years ago, a tweet on Twitter, a couple of words on Instagram, or a Facebook post is followed, analyzed, and evaluated by millions for decision-making nowadays.

This change leads companies and managers to use social media effectively in their communicative activities with stakeholders with personal interests. Traditional press conferences and statements are being replaced by instant messages and posts. Many companies and organizations inform the public through social media platforms. Although the legal obligation for new companies to create websites and inform the public through this site is a recently adopted trend, many companies use one or more social media accounts voluntarily without any legal obligation. The present study aims to emphasize the power of social media tools, to put forward the risks entailed by statements and publications made by companies and managers to meet the needs for public disclosure and transparency, and to indicate key points for effective social media use.

1 Corporate Needs for Public Disclosure and Transparency

For companies, maintaining operations depends on good relations with stakeholders. Solidarity among the company and its stakeholders will make the ←11 | 12→company stronger. To promote such solidarity, information about the company required by stakeholders must be provided. As a natural result of relationships between stakeholders and the company, the former regard the access to comprehensive information concerning corporate activities and goals as a legitimate right (Oliver, 2004). This right brings about a continuous increase in the demands of stakeholders regarding transparency. By ensuring transparency, investor confidence can be improved through satisfaction of stakeholders’ need for information and attainment of market efficiency by the company while information asymmetry and stock price fluctuations in the market can be reduced. From this point of view, transparency means the public disclosure of financial and nonfinancial information about the company, excluding confidential business information that is yet to be disclosed, in a timely, correct, complete, comprehensible, interpretable, cost-efficient, and easily accessible manner (SPK, 2011).

Companies disclose information for both getting the support of shareholders and complying with legal obligations. It is possible to classify the public disclosure practices of companies into two groups as obligatory and voluntary ones (KAP, https://www.kap.org.tr). Obligatory public disclosure practices include duties entailed by legislation on capital markets and stock exchanges. Disclosure of special circumstances, financial reports, or other information (monthly notices, weekly reports, etc.) demanded within the framework of regulations of legal authorities (e.g., Capital Markets Board) are examples of obligatory public disclosure. Voluntary public disclosure practices include announcements made out of the company’s own volition in addition to the information that is legally required to be made public. Sustainability reports may be given as examples.