I love blogging about blogs, so let me point you to a new working paper entitled “Do Political Blogs Matter? Corruption in State-Controlled Companies, Blog Postings, and DDoS Attacks.” I certainly like the idea that blogs can be tools to fight corruption. But, and I say this as someone who hasn’t read the paper, I don’t know how much should we care about the result that online criticism caused very short-term changes in stock prices. Perhaps Brayden King, with his interest in activism directed towards private companies, would have an interesting comment.
The authors are economists, Ruben Enikolopov, Maria Petrova, and Konstantin Sonin. The paper is here and the abstract:
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.