Characteristics and stock prices of firms flamed on the Internet: The evidence from Japan

•This study investigates Internet flaming using Japanese data on flamed firms.•We find that large firms with negative net income are more likely to be flamed.•Flaming alone may be too weak to impact the stock prices in the short-run.•Flaming can lower the stock prices at a later period, or with newspapers reports.•Negative market reactions are intensified with the serious flaming contents.

In this study, we investigate the economic impact of flaming on the Internet using Japanese data. In examining the data on firms that experienced flaming between 2006 and September 2013, we establish the following three main findings. First, large firms and ones with negative net income are more likely to be flamed on the Internet. Second, flaming alone may be too weak to impact the stock prices of target firms in the short-term, although it can lower the stock price of target firms at a later period, or when newspapers report the same event. Third, the negative market reaction grows when the flaming content is serious.