The monitoring role of social media

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 substantially reduce both violations and penalties following the introduction of 3G in a local area. To validate social media activity as the mechanism, we show that 3G access results in sharp increases in Tweet volume and that facilities located in areas with high Tweet volume misbehave less. The effect of 3G access on misconduct is stronger for facilities of more visible firms and concentrated in nonfinancial 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.