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Title: Social Media and Corruption

Author(s): Ruben Enikolopov, Maria Petrova and Konstantin Sonin

Publication Date: May 2016

Keyword(s): financial markets, governance, political economy and social media

Programme Area(s): Development Economics, Financial Economics and Public Economics

Abstract: There is ample evidence that in democratic countries traditional mass media affect peopleâ??s behavior and foster political and corporate accountability. Do new media such as blogs play a similar role in non-democratic countries, where offline media are often suppressed? We study consequences of blog posts about corruption in Russian state-controlled companies. We show that anti-corruption blog posts by Aleksei Navalny, a popular Russian civic activist, had a negative causal impact on market returns of state-controlled companies. For identification, we exploit the analysis of the precise timing of blog posts combined with quasi-random variation in access to blog platform caused by hacker attacks. The effect becomes less pronounced and even positive for the posts that attract the most attention, consistent with disciplining effect of social media. Furthermore, the posts have a long-term impact on returns and are associated with higher management turnover and less minority shareholder conflicts. Taken together, our results suggest that social media can discipline corruption even in a country with limited political competition and heavily censored mass media.

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Bibliographic Reference

Enikolopov, R, Petrova, M and Sonin, K. 2016. 'Social Media and Corruption'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11263