Circular economy disclosure and corporate credit ratings: the informational value of social media

Purpose The growing diffusion of circular economy (CE) practices has increased the importance of communicating firms' CE initiatives to external stakeholders. Although previous studies have documented several economic benefits associated with CE disclosure (CED), limited evidence exists on its implications for debt market participants. In particular, the role of CED in shaping the assessments performed by credit rating agencies remains largely unexplored. Drawing on signaling theory, this study addresses this gap by investigating whether CE information disseminated through Twitter influences corporate credit ratings. Design/methodology/approach The analysis is based on an unbalanced panel of 491 firm-year observations from 101 firms belonging to the S&P 500 Index and operating in the industrials, energy and utilities, and basic materials sectors over the 2020–2024 period. CED is measured using a dictionary-based content analysis of firms' official Twitter accounts, while corporate credit ratings are measured using S&P long-term issuer credit ratings. The proposed relationship is tested using an ordered probit model. Findings The results reveal a positive and statistically significant association between CED disseminated through Twitter and corporate credit ratings. Firms communicating more extensively about their CE initiatives through corporate social media are more likely to receive more favorable credit ratings. These findings suggest that CED constitutes decision-useful information for credit rating agencies by reducing information asymmetry and providing additional insights into firms' long-term strategic orientation, resource efficiency, innovation capability, and sustainability commitment. Originality/value This study makes four main contributions. First, it provides novel empirical evidence that CED influences corporate credit ratings, thereby extending the literature on the economic consequences of CED. Second, it contributes to the sustainability disclosure and debt markets literature by demonstrating that CE information disseminated through corporate social media represents a relevant source of non-financial information for credit rating agencies. Third, it enriches the literature on online corporate disclosure by highlighting the informational value of social media as an effective disclosure channel. Finally, it extends signaling theory by showing that voluntary disclosure of CE information through corporate social media functions as a credible signal capable of positively influencing external assessments of firms' creditworthiness.