Do influencers pay? Evidence from the Internet celebrity economy in China

Abstract

The Internet celebrity (“Wanghong”) economy is a business model that leverages the purchasing power of social media users through online traffic. Since 2016, China has witnessed the rise of the Wanghong economy, characterized by listed firms’ engagement in livestreaming and Wanghong-based commerce. In this study, we find distinctive patterns in short- versus long-term market responses. Investor attention positively affects short-term cumulative abnormal returns upon firms’ initial involvement in Wanghong activities, reflecting sentiment-induced price buoyancy. However, initially overreacted, positive buy-and-hold abnormal returns reverse over 7- to 12-month holding periods. While the Wanghong effect on revenue growth is marginal, long-term returns are in line with firm profitability, suggesting market valuations ultimately revert to fundamentals. In sum, there is a discernible dynamic shift from short-term emotional reactions to long-term rational adjustments in the Wanghong economy. © 2025 Elsevier B.V., All rights reserved.