Do Political Blogs Matter? Corruption in State-Controlled Companies, Blog Postings, and DDoS Attacks
Institute for Advanced Study; New Economic School; Center for Economic and Financial Research (CEFIR)
Princeton University; New Economic School (NES)
New Economic School; Higher School of Economics; Centre for Economic Policy Research (CEPR)
September 27, 2012
Though new media has become a popular source of information, it is less clear whether or not they have a real impact on economic activity. In authoritarian regimes, where the traditional media are not free, this potential impact might be especially important. We study consequences of blog postings of a popular Russian anti-corruption blogger and shareholder activist Alexei Navalny on the stock prices of state-controlled companies. In an event-study analysis, we find a negative effect of company-related blog postings on both daily abnormal returns and within-day 5-minute returns. To cope with identification problem, we use the incidence of distributed denial-of-services (DDoS) attacks as a variable that negatively affects blog postings, but is uncorrelated with other determinants of asset prices. There is a substantial positive effect of the DDoS attacks on abnormal returns of the companies Navalny wrote about, and this effect is increasing in amount of his attention to these companies. The effect is decreasing in attention to posts of other top bloggers, increasing in visitors’ attention to Navalny’s posts, and is consistent with more pronounced individual, in contrast to institutional, trading. Finally, there are long-term effects of certain types of posts on stock returns, trading volume, and volatility. Overall, our evidence implies that blog postings about corruption in state-controlled companies have a negative causal impact on stock performance of these companies.
Number of Pages in PDF File: 37
Keywords: political economy, blogs, Russia, Alexei Navalny, corruptionworking papers series
Date posted: September 27, 2012 ; Last revised: September 28, 2012
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