Motivated by the rise of public comments on social media platforms, this study investigates the influence of social media commentary on corporate financing decisions, with a specific focus on private placements, utilizing text data sourced from Chinese stock boards. Leveraging advanced textual analysis techniques, including BERT and GPT, we identify sentiments associated with private placement attempts. Our findings reveal that companies targeted by negative social media commentary tend to experience unfavorable stock returns following the private placement announcement, and sentiments articulated by small investors can predict potential placement terminations. Moreover, these comments may impact the likelihood of regulatory approval, indicating their significance in corporate governance. Additionally, we observe that the predictive power of negative comments increases with their information quality. Overall, our investigation sheds light on the influential role of social media commentary in corporate governance, tapping into collective wisdom to reveal valuable insights.
