Increasing Tweeter access yields less corporate misconduct; effect is stronger for facilities of more visible firms; effect is concentrated in non-financial violations (unsafe workplace conditions or inappropriate treatment of employees/customers)

Heese, Jonas and Pacelli, Joseph, The Monitoring Role of Social Media (November 16, 2022). SSRN: http://dx.doi.org/10.2139/ssrn.4278696

Abstract: In this study, we examine whether social media activity can reduce corporate misconduct. We use the staggered introduction of 3G mobile broadband access across the United States to identify exogenous increases in social media activity and test whether access to 3G reduces misconduct. We find that facilities reduce violations by 1.8% and penalties by 13% following the introduction of 3G in a local area. To validate social media activity as the underlying mechanism, we show that 3G access results in sharp increases in Tweet volume and that facilities located in areas with high Tweet volume engage in less misconduct. The effect of 3G access on misconduct is stronger for facilities of more visible firms and concentrated in non-financial violations, such as those involving unsafe workplace conditions and inappropriate treatment of employees and customers. Overall, our results demonstrate that social media plays an important role in monitoring corporate misconduct.

Keywords: corporate misconduct, social media, Twitter, mobile broadband.

JEL Classification: M40, M41, M43