A recent doctoral research at Babcock University has found that social media posts and activities significantly influence the market valuation of listed companies in Nigeria. The study, conducted by Dr. Sileola Adebusola Akinbowale, surveyed 22 listed service companies and 392 senior management staff. It established that social media marketing and investor communications jointly account for 72 percent of corporate value creation. This indicates a significant shift from traditional factors that influence corporate valuation.
The research identified Social Media Influencer Activity (SMIA) as the second most potent predictor of corporate valuation. SMIA had beta weights ranging from 0.205 to 0.314. In the Market Capitalisation model, influencer engagement emerged as the single most influential factor with a beta of 0.314. This outperformed traditional investor relations and corporate public relations, highlighting the growing importance of social media in investor communications.
The study also found that structured Social Media Advertising (SMAD) explains 54 percent of asset expansion variance. This indicates that advertising spend on digital platforms directly correlates with asset growth and shareholder returns. With Nigeria’s growing digital population of over 109 million active internet users and 28 million citizens on Meta platforms, the impact of social media on corporate valuation is expected to continue.
The research noted a David-versus-Goliath dynamic, with firm size showing a negative relationship with valuation. Larger conglomerates are handicapped by bureaucratic processes compared to smaller, agile service firms that interact directly with customers. This suggests that smaller firms may have an advantage in leveraging social media for corporate valuation.
The study’s findings have implications for Retirement Savings Accounts (RSAs), retail dividends, and job creation. Enhanced digital engagement translates to higher patronage and earnings forecasts. As ordinary citizens’ likes, shares, and comments now influence corporate valuation on the Nigerian Exchange, companies must adapt their strategies to effectively engage with their online audiences.
The author explained that corporate value can be split into N72 from social media marketing and transparent investor communications and N28 from physical properties and traditional structures. This highlights the significant impact of social media on corporate valuation and the need for companies to prioritize digital engagement.
The report concluded that the street and the stock exchange have merged, with social media posts and activities now capable of influencing corporate valuation. As Nigeria’s digital population continues to grow, companies must prioritize social media marketing and investor communications to remain competitive. The study’s findings have significant implications for listed companies, investors, and regulators.
Key points
- Social media marketing and investor communications account for 72 percent of corporate value creation.
- Influencer engagement is the single most influential factor in the Market Capitalisation model.
- Structured Social Media Advertising explains 54 percent of asset expansion variance.
