Some blogs, including this one, are devoted to analysis and discussion of anticorruption policy issues. But a number of anticorruption bloggers are more like investigative journalists—finding and exposing instances of (alleged or apparent) corruption. Do these blogs make a difference?
This question is related to the more general question of whether the modern communications revolution—particularly the spread of internet access—will be helpful in fighting corruption. There’s reason for optimism: there’s already lots of evidence that the spread of traditional media (newspaper and radio) were crucial in the fight against corruption in the 20th century, and the internet (along with other communications technologies, like mobile phones) lowers the cost of both disseminating and accessing information about corrupt activities. In addition to individual anticorruption bloggers and websites, platforms like I Paid a Bribe and Bribespot are emerging that may enable much larger numbers of people to disseminate information. These new technologies have gotten a lot of press, but do they make a big difference?
There’s surprisingly little systematic evidence on the impact of internet on corruption, but a recent paper on the Russian anticorruption blogger (and opposition figure) Alexei Nevalny, co-authored by Ruben Enikolopov, Maria Petrova, and Konstantin Sonin, suggests that this sort of anticorruption blogging may have a real impact. Nevalny is a well-known (and controversial) figure in Russia, and he got a lot of international press last month for his exposé on corruption in the Sochi Winter Olympics. But he got his start blogging about corruption in Russian state-owned companies. And, according to Enikolopov, Petrova, and Sonin, Navalny’s posts made a difference: when he posted about a company on his anticorruption blog, that company’s value took a significant hit. What can we learn from this?
For one thing, it suggests that Navalny’s blog was disclosing genuinely new information. If the corruption he was revealing was already widely known, it would presumably already be reflected in the share price. For another, it suggests that Navalny’s information was credible, at least to investors. If he were viewed as a crank with a political axe to grind, his allegations of corruption wouldn’t affect firm value (unless everyone expected everyone else to treat the information as significant, even though no one believed it—which seems unlikely). Third, it suggests that the corruption in Russian firms that Navalny was exposing typically involved management taking actions that injured shareholders. Otherwise, it’s not clear why there would be such a negative market reaction to the information (unless the disclosure increases the likelihood of some sort of government investigation—which seems unlikely in this context).
Taken together, this seems to suggest that anticorruption bloggers can, at least under some circumstances, make a real difference. That said, as the authors of the study acknowledge, it’s not straightforward to sort out cause and effect here. Maybe Navaly’s posts revealed information that caused firms to lose value, but it’s also possible that Navalny was more likely to post about a firm that was already in trouble, and would have lost value anyway. To deal with this, the study’s authors do something clever: they look at periods when the entire server that hosted Navalny’s blog was shut down for reasons unrelated to his blog. During those periods, those companies that Navalny was in the habit of writing about frequently tended to do better. That suggests that his posts actually had an impact.
What to make of this? The study of Navalny’s impact does provide preliminary support for the hypothesis that internet technology can be a valuable tool in the fight against corruption. But it’s worth noting that Russia may be a somewhat unusual case, in that the mainstream media is effectively controlled by the state, but bloggers are at least somewhat free to post on controversial topics. In a country with a freer press, like the United States, blogging may be less likely to provide genuinely new information. In a country with much tighter controls over all media (including blogs), like China, bloggers may be less free to provide new information even if they have it.
Also, Alexei Navalny was quite an unusual blogger. His personal wealth and status as a shareholder of many of the companies he blogged about gave him access to information that others did not have, making his posts credible. The technology gave him a way to spread his information (despite the controls on the mainstream media), but his access to information was due to a combination of his personal opportunities and Russian corporate law. So his example might not be generalizable to anticorruption bloggers generally.
The study certainly seems to suggest that Navalny has some effect, but I guess the question I have is what kind of effect it is. From reading the abstract of the paper, it seems that they looked mostly at short-term hits to the stock price. I wonder if the effects really last, or are just the equivalent of bad PR for a company whose fundamentals remain entirely unchanged. Short-term damage to a stock price can certainly be a little painful, but if it doesn’t affect the long-term value position of the company it’s not clear why it would lead to less corruption — especially if the corruption paid off in the companies’ actual revenues, rather than paper value. One could even imagine a situation in which occasional and (if short-term) artificial hits to the stock price would benefit insiders who chose to double down on the temporarily depressed value of the stock.
I don’t know what the truth of the matter is, but it seems that there are many ways to interpret the data.
I think this point was alluded to in the post: information revealed in the blogs will only lead to movements in share price if the market isn’t efficient. Thus one would think that information would have less of an impact in America, where the stock market is more mature and efficient than somewhere like China and Russia. In the other words, literature that rank opportunities for arbitrage could potentially be a good proxy for where blogs would make the most difference.
I would also hesitate to extrapolate Navalny’s success to bloggers in general. For example, Warran Buffett’s words usually have an impact on the market, often regardless of the validity of the statements.
I was thinking along on the same lines: information and market efficiency. Are there other non-anecdotal ways of gauging influence? Perhaps we could learn something from Chinese microblogs, where word of a corrupt local official can spread like wildfire before there’s a clampdown (assuming there is). Some of these stories–perhaps the most popular ones–surely have consequences for officials
Even if the Russian stock market were efficient and changes in stock price did reflect changes in the value of a company, I think that changes in the stock price of companies targeted by Navalny give us a narrow picture of the ways in which Navalny’s blog matters. Even if the three lessons in this post turned out to be false, Navalny’s blog still is quite valuable in my opinion, in a more anecdotal sense. Navalny has moved public opinion (especially among young people), threatened the establishment in a very real way (his conviction in a sham trial demonstrates to some extent how big of a threat Navalny’s blog presented to the government), and inspired the use of social media by others in advocacy about corruption and LGBT rights, among other issues.
I think bloggers from other countries who are not in Navalny’s unique position can still learn from Navalny’s example in achieving these non-quantifiable benefits. For example, even if an anti-corruption blogger’s revelations about certain companies or officials are not credible, the blog might still galvanize public opinion around corruption as an issue generally, without changing the behavior of well-informed investors.
Although you mentioned this briefly in your post, I would like to see an analysis of the efficacy of websites like “I Paid a Bribe.” If part of the reason why Navalny’s blog has been influential on Russian markets because his information is deemed credible, then is possible for websites that provide a platform for people to report bribes to be as influential? Interestingly on “I Paid a Bribe,” there is an option for someone to disclose a bribe he or she paid. The discloser has the option of remaining anonymous (though contact information is required so I am not sure how that would work) and deciding which entities should receive the information such as the media.
I do question the incentive for one to disclose a bribe he/she paid on the internet, however, which greatly affects success of websites like “I Paid a Bribe.”
The issue of how the internet impacts anti-corruption efforts has also made me curious on whether mobile apps can play a helpful role. If mobile apps provided some sort of public disclosure on corruption, I could see it being effective on influencing public perception which could in turn encourage more robust anti-corruption efforts.