Tag: Election observers
Accountability in Russia
This policy brief summarizes two recent research papers that are related to obstacles to political accountability in modern Russia and potential ways to overcome these obstacles. The first paper provides a rigorous assessment of the extent of electoral fraud in Moscow city during the parliamentary elections held on December 4, 2011. Using random assignment of independent observers, we estimate the actual share of votes for the incumbent United Russia party to be at least 11 percentage points lower than the official count (35.6 percent instead of 46.5 percent). A less rigorous, but more realistic estimate is 21 percentage points. These results suggest that electoral accountability in Russia is limited. The second paper demonstrates that even in an environment with low electoral accountability and limited freedom of media, alternative accountability mechanisms may emerge. In particular, anti-corruption campaigns in social media may affect the valuation of state-controlled companies, so that market forces put a disciplining effect on the managers of SOEs. 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. We use the incidence of distributed denial-of-services (DDoS) attacks to show that the effect is not driven by the endogenous timing of blog postings. We also show that 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.
To study the extent of electoral fraud we employ data from a large-scale field experiment that allows us to estimate the amount of electoral fraud in the city of Moscow during Russian parliamentary elections in December 2011. In particular, we exploit randomized assignment of independent observers to polling stations. Prior to the parliamentary elections the independent NGO Citizen Observer (Grajdanin-nabludatel) trained more than 500 volunteer observers in the city of Moscow. The observers were sent to 156 randomly selected polling stations. The polling stations were selected using a systematic sampling technique. In particular, polling stations were divided by electoral districts. Within each district, polling stations were sorted according to their official number assigned by Central Election Committee. Every 25th polling station within electoral district starting from the 1st was assigned for observation, resulting in a sample of 185 polling stations. The Citizen Observer’s network recruited enough observers to cover 156 of the 185 polling stations, which corresponds to 4.9 percent of the 3,164 ordinary polling stations in Moscow.[1] To make sure that this procedure does not lead to a biased sample because of some hidden periodicities we check that in the previous parliamentary elections in 2007 polling stations selected using a similar procedure were not different from other polling stations.
Comparison of the share of votes received by different parties and the turnout between polling stations with independent observers from Citizen Observer (treatment group) and without observers (control group) is presented in Figure 1. The results indicate that the presence of observers led to a decrease in the share of votes for United Russia of 10.8 percentage points and the turnout at the polling stations with observers was lower by 6.5 percentage points.
Figure 1. Vote Shares in 2011 
Notes: The figure is reproduced from Enikolopov, Ruben, Vasily Korovkin, Maria Petrova, Konstantin Sonin, and Alexei Zakharov (forthcoming) “Electoral Fraud in Russian Parliamentary Elections in December 2011: Evidence from a Field Experiment.” Proceedings of the National Academy of Sciences.
The above results are likely to provide a lower bound on the extent of the electoral fraud, since the presence of observers at the polling stations did not fully prevent fraud. To provide more information on the extent of the fraud, we divide all treatment stations into three groups: those in which observers reported no serious violations (75 polling stations), those in which serious violations were reported, but the observers received the final protocol (43 polling stations), and those in which all observers were not able to get the official protocol of the vote count (38 polling stations), which happened if the observers were dismissed from the polling station or the heads of electoral commissions illegally refused to give a signed copy of the protocol.
Figure 2 shows the distribution of vote shares for United Russia at polling stations from these three groups. For observations in the control group the distribution seems to be bimodal with two peaks – one around 25 percent of votes and another one around 55 percent of votes. The distribution for the precincts with observers also has two peaks, with the first one around 25 percent of votes. Note, however, that the second mode of this distribution, around 50 percent of votes, is noticeably smaller as compared with the control group. Moreover, for the polling stations in the treatment group in which observers reported no serious violations the distribution becomes unimodal with the peak around 25 percent of votes for United Russia. Thus, the results are consistent with the following hypothesis: the distribution of vote shares for United Russia in the control group is simply a mixture of two distributions that correspond to polling stations without large electoral fraud (for which the distribution is centered around 25 percent of votes) and polling stations with substantial electoral fraud (for which the distribution is centered around 55 percent of votes). Note also that a similar pattern is observed for the distribution of turnout across three groups of precincts, but not for the distribution of vote shares for other parties.
Figure 2. Distribution of votes for United Russia 
Notes: The figure is reproduced from Enikolopov, Ruben, Vasily Korovkin, Maria Petrova, Konstantin Sonin, and Alexei Zakharov (forthcoming) “Electoral Fraud in Russian Parliamentary Elections in December 2011: Evidence from a Field Experiment.” Proceedings of the National Academy of Sciences.
To assess the overall influence of the electoral fraud in Moscow on the outcome of Russian parliamentary elections, we also estimate the total number of votes that United Russia received due to electoral fraud. As both vote share of a ruling party and turnout were affected by electoral fraud, we look at the number of votes for each party as a share of registered voters in precincts with and without observers. Based on these numbers, our conservative estimate of the number of votes, which United Russia received at the ordinary precincts in Moscow due to electoral fraud, is equal to 635,000. This is a lower bound for the size of electoral fraud as it assumes that the presence of observers fully prevented any fraud, and at least anecdotal evidence suggests that it is not always the case. If we use results from the polling stations in which observers report no serious violations as an alternative estimate, the number of stolen votes increases up to 1,090,000.
The results presented above indicate that because of electoral fraud, voting does not constitute an efficient mechanism to replace those in power, and, therefore, electoral accountability in Russia does not work to discipline politicians in the office. Other means to hold politicians and public officials accountable are also limited, since traditional media is often censored and politics is generally not competitive. We ask the question whether in such environment there is any alternative ways to hold public officials accountable, and, in particular, if new media, such as blogs, can make a difference. Specifically, we study whether blog postings of a popular Russian blogger, shareholder activist, and, subsequently, one of the leaders of emerging opposition to President Putin’s regime, Alexei Navalny, have had an impact on stock performance of the companies whose wrongdoings he uncovered and made public.
First, we show that daily abnormal returns of the companies Navalny wrote about were significantly lower after Navalny’s posts about them. The results hold if we control for mentions of these companies in other types of media (business newspapers, online newspapers, and blogs) and for company-year and year-month fixed effects. In addition to looking at daily abnormal returns, we show similar results for 5-minute abnormal returns even controlling for trading-day fixed effects (see Figure 3). The magnitude of this effect is quite sizable with a daily decline of 0.5 p.p. after an average blog posting, and a daily decline of 0.9 p.p. after an important blog posting.
Figure 3. 5-minute Abnormal Returns and Navalny’s Blog Postings, Non-Trading Time (Evenings and Weekends) Excluded
We also provide evidence that the impact of blogging on stock performance is causal. Although the results described above are consistent with the negative impact of blogging, they could be explained, e.g., by selective exposure. To identify the causal effect of blog postings we use an external variable, distributed denial-of-service (DDoS) attack on a blog service, as a source of exogenous variation. During the period under study (between January 2008 and August 2011), these DDoS attacks, allegedly, were not specifically targeting the Navalny’s blog, but they affected the accessibility of the whole blog platform, and the Navalny’s blog was also affected. As a result, DDoS attacks either prevented Navalny from writing a post or prevented his readers from reading his blog, but there was no obvious reason why they might influence fundamental determinants of stock prices of the companies Navalny wrote about.
In a reduced form model, we find significant positive effect of DDoS attacks on daily abnormal returns of the companies Navalny wrote about. This effect is stronger for the companies Navalny was more focused on (the latter result holds even with DDoS attack fixed effects). Quantitatively, the effect of DDoS attack is similar to the absence of the post or to the presence of the post with no information about the company in question. We also show that though DDoS effect is increasing in Navalny’s attention to the companies he was writing about, it is not increasing in the amount of general news attention to these companies.
Finally, in addition to the short-term effects we just described, we look at the longer-term one-month effects of blog postings. We find that although there were no long-term effects of the ordinary postings, there were negative and significant long-term effects of the most important postings, as proxied by at least 5 mentions of a company in the post. In addition, during the month after a blog posting, there was a larger volatility of stock returns and a larger trading volume. It appears that the number of transactions, controlling for trading volume, was significantly larger in both the short-term and longer-term perspective. Smaller average transactions are consistent with more individual, in contrast to institutional trading, which suggest that short-run effects of blog posting are driven by attention effects, rather than provision of new information. Overall, all our results are consistent with a negative causal impact of blog postings on stock performance of state-controlled companies, and imply that potentially there is a disciplining effect on the behavior of public officials who manage these companies. Thus, our results suggest that posting in online social networks can affect the stock performance of state-controlled companies, and, as a result, can become an unusual alternative mechanism to putting additional checks on the behavior of government officials even if political competition remains limited, and traditional media remain controlled.
The report is based on two papers: Enikolopov, Ruben, Vasily Korovkin, Maria Petrova, Konstantin Sonin, and Alexei Zakharov (2012) “Electoral Fraud in Russian Parliamentary Elections in December 2011: Evidence from a Field Experiment.” Proceedings of the National Academy of Sciences, 109 (52); Enikolopov, Ruben, with Maria Petrova and Konstantin Sonin “Do Bloggers Have any Real Influence? Event Study of Blog Postings by a Russian Activist Shareholder and Blog Service DDoS Attacks,” CEPR Working Paper.
[1] The sample excludes 210 precincts that had a special status, as they were located in hospitals, military units, or pre-trial detention facilities. These polling stations were excluded from the analysis since sending observers there was not always possible, and it was not clear if these polling stations were sufficiently similar to each other to use randomization. The number of votes cast at these polling stations, however, stood at only 1.8 percent of total votes in Moscow.
Presidential Elections in Russia: Massive Vote Fraud Ensures that Legitimacy is in Doubt, but the Policy Direction is not
The March 4th, 2012, elections formally returned Vladimir Putin, the paramount leader of Russia since 1999, to the presidency. Despite Draconian restrictions on entry, financing, campaigning by other candidates, Putin’s dominance of TV, blatant use of state employees and funds to his own advantage, and significant vote fraud, the victory was underwhelming in the end. While the official tally was only 63.6 percent in Putin’s favor, estimates of his vote share by independent observers relying on networks of tens of thousands of volunteers were in the range of 49-57 percent of the turnout; even lower. (If his share was truly below 50 percent, a run-off vote would have to take place between Putin and the runner up) The second major outcome of the elections was the successful attempt by civic society to ensure a fair vote count in Russia’s largest city and capital, Moscow, where Putin’s official vote share (45 percent) on March 4th was the same that United Russia achieved in the December 4th parliamentary elections. (Generally, Putin polls much higher than United Russia.) The third outcome was the emergence of Mikhail Prokhorov, a billionaire with negligible experience in politics, as a major political force representing large cities and young educated voters.
The Success of Civic Society in Moscow and Vote Fraud Elsewhere
The central issue in the wake of the March 4th elections is the extent of fraud organized by the incumbent. Massive fraud during the December 4th parliamentary elections generated mass protests in response. In total, hundreds of thousands of Muscovites took part in four large rallies held during this winter. (No political rallies of comparable size, except for the state-sponsored pro-Putin ones, have taken place during the last 15 years.) A similar discrepancy between the actual vote and official returns was expected to generate even larger protests this time round.
Despite dozens of reported and video-documented cases of organized groups brought in to Moscow to vote multiple times and the presence of tens of thousands of observers, public outrage after massive vote fraud in the parliamentary elections last December is likely to have prevented the most outrageous and blatant forms of fraud during these elections. No less important, it is also likely that they generated less directly observable forms of electoral manipulation. Not surprisingly, for Moscow, the vote count by Citizen Observer, Golos, and other independent and highly respected observer organizations nearly coincided with the official election results, certified by the widely despised Central Election Commission (CEC). (Since December, the name of the head of CEC, Vladimir Churov, has become a synonym for incompetence and of fawning loyalty to the incumbent.) This does not mean, however, that no fraud took place outside the capital.
Figure 1. Cross-plot of the United Russia (Putin) vote share vs. turnout in the December 4, 2011, parliamentary elections and the March 4, 2011, presidential elections in Moscow. (Courtesy of Alexei Zakharov, HSE and Citizen Observer, using the CEC data.)
A side effect of the fair vote count on March 4th, 2012, in Moscow was that it highlighted the extensive centrally-organized fraud in parliamentary elections held on December 4th, 2011. (See the December 2011 issue of the FREE Policy Brief for a snap analysis of the parliamentary elections.) Figure 1 shows that the suspicious-looking relationship between the turnout and the Putin-led United Russia Party, highly visible in December (top figure), completely disappeared in March (bottom figure). Thus, the strong correlation between turnout and the United Russia vote share is a result of ballot-stuffing rather than anything else (theoretically, such a correlation might be caused by some socio-demographic characteristics of United Russia’s supporters). Similarly, Figure 2 exhibits a “normal” (Gaussian) distribution of total votes for United Russia/Putin by turnout (this is what should be expected theoretically, and is consistently observed in democratic elections around the world) on March 4th (bottom figure) and an unusual distribution, a result of changed voting protocols on December 4th (top figure).
Figure 2. Number of ballots by turnout in the December 4, 2011, parliamentary elections, and the March 4, 2011, presidential elections in Moscow. (Courtesy of Maxim Pshenichnikov using the CEC data.) Note the spikes on 70,75,70,85, and 90 percentiles on the left graph, a result of “targeting” by election officials. 
Outside Moscow, the situation was different. Across the country, independent observers documented ballot stuffing and manipulation of local vote returns. St. Petersburg, the second largest city in Russia with a population of just over 4 million and the cradle of the “Putin’s team”, is a case in point. The preliminary estimates, based on a (nearly random for these purposes) sample of 269 polling stations (which is about 12 percent of the total number of station in the city), shows that the actual vote share for Putin was 50 percent rather than the officially reported 65 percent, while for Prokhorov it was 22 percent instead of 14 percent, and for Zyuganov 15 percent instead of 11 percent in the official tally. These estimates are based on the comparison between the official results as certified by the Central Electoral Commission with official copies of vote protocols signed by accredited observers and members of local electoral commissions at the polling stations. In other words, the discrepancy is a result of vote fraud at the level of the territorial electoral commission instead of more conventional forms of fraud, such ballot-stuffing at polling stations.
New Faces of Russian Politics
Three of the four competitors against Putin on March 4th were veterans of Russian politics. The Communist party Chairman, Gennady Zyuganov, lost presidential elections to Boris Yeltsin in 1996, Putin himself in 2000, and to Dmitry Medvedev, Putin’s figurehead “heir,” in 2008. (In 2004, the communists ran a minor candidate). Vladimir Zhirinovsky, a perennial nationalist candidate for presidency since 1991, has maintained a parliamentary faction for his one-man party for 20 years, but has never come close to winning the presidency. Sergei Mironov, a former Putin ally (in 2004 he ran for presidency with the announced goal “to help Putin win presidency”), was the main beneficiary of the December 4th, 2011, vote when many people supported his party primarily for the reason that parties they would have otherwise voted for were banned from participation. By official tally, Zyuganov got 17.2 percent (2nd place), Zhirinovsky 6.2 percent (4th place), and Mironov 3.9 percent (5th place). Despite the fact that these three have been on the ballot for a long time, they have never succeeded in presenting a genuine alternative choice for Russian voters at the polls and therefore posed no serious threat to Putin’s authority.
Mikhail Prokhorov, the 2nd richest person in Russia according to Forbes, ran a campaign that was watched warily by both Putin in Kremlin and Putin’s opponents in the liberal camp, and came in 3rd place with an official total of 8.0 percent. In Moscow, his result was even more impressive with 22 percent of the vote, second only to Putin’s 45 percent. While Prokhorov certainly benefited from the absence of Grigory Yavlinsky, who failed to clear the (unheard of in democratic countries) requirement to collect 2 000 000 signatures, and other liberal politicians, his results exceeded the previous combined returns of the liberal parties and candidates in parliamentary and presidential elections in 2000. The success of his candidacy have raised doubts on a long-held assumption in Russian politics that a rich, not to mention very rich, candidate has no chance of gaining traction in popular vote.
Another new face in Russian politics, Alexei Navalny has a law degree, business background, and was a member of the leadership in the Yabloko party (expelled in 2007) before becoming a famous blogger and shareholder activist in the beginning of 2010. His blog (navalny.livejournal.com) is now one of the most popular blogs in Russia, with more than 66,000 followers. A major boost to its popularity was the “Rospil” project that focused on protecting minority shareholders of large state-owned companies (and, by extent, on the management of the taxpayers’ property by the Putin government). Navalny used his blog to organize large-scale petitioning and litigation campaigns related to corruption in state-controlled companies. As a result of these activities, Navalny was described by the BBC in 2011 as “arguably the only major opposition figure to emerge in Russia in the past five years.” (Obviously the BBC has not foreseen the rise of Prokhorov.) After December 4th, 2011, Navalny became a major leader of the protests and organizers of election observers.
“Staying the Course”
President-elect Vladimir Putin will start his new 6-year term in difficult times. The election raised questions about his true legitimate level of popular support, yet there is little doubt that he does not face any viable alternative challengers in the near future. Given that Putin has proven himself extremely rigid in the choice of policy and personnel (he would not get rid of close subordinates even if wide-spread corruption allegation would make them a visible drag on his popularity), the new government is not expected to be radically different from the current one (which features most of the ministers serving for 5-10 years in their current capacity). His anointed prime-minister is not a new face either. Dmitry Medvedev, who served as Russia’s president for the last 4 years, is not expected to bring forward any major policy changes.
Fortunately for Putin the opposition is not organized and cannot settle on any particular message or alternative policy direction, let alone viable leader. The protest movement during the winter of 2011-12 was characterized more by decentralized leadership, featuring a number of prominent literature, arts, and entertainment figures. With its goal to ensure fair elections, it has, however, united a very diverse group of smaller movements ranging from radical young communists to libertarians despite its not having provided an alternative leader to Putin. In the end, the outcome of the March 2, 2012, presidential election has ended the myth of a significant Putin majority, casted considerable doubt on his legitimacy and has shown that Russians seem hungry for a change. It has, however, also left a big question mark on what the opposition’s next steps are and who the alternative could be.
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A Resonant Signal: the Russian Parliamentary Elections of December 2011
Days before December 4, prospects of electoral democracy in Russia looked bleak. Consolidation of the authoritarian rule of Vladimir Putin, Russia’s paramount leader since 1999, adoption of non-democratic electoral laws and politically-motivated law enforcement, constant harassment of media, civil society organizations, and election observers, and outright involvement of the government in the electoral process gave little hope that elections would make the political leadership accountable. The courts and electoral officials were used to prevent most opposition leaders from registering a party or participating in elections; opposition financial supporters had been driven into exile. Parliamentary elections in December 2007 and presidential elections in March 2008 were marred by such irregularities that many observers, myself included, had stopped counting. However, the outcome of December 4, 2011 will arguably have a major impact on future political developments in Russia.
Firstly, the official results of United Russia, the party that is led by Vladimir Putin and had a constitutional majority in the previous parliament, showed a significant drop in support for the current political leadership among the general public. Despite overwhelming presence on state-controlled TV channels, significant support by government officials, and outright vote fraud, the official results show the ruling party deserted by more than a quarter of its supporters (12.8 million out of 44.7 million who voted for United Russia in 2007).
Secondly, those who turned out to vote (the turnout was significantly lower than at previous parliamentary elections) showed obvious discontent with Putin/United Russia policy and, possibly, with the way elections were conducted. In particular, millions of Russians voted for Just Russia, a party with no charismatic leader and a platform that is not substantively different from that of United Russia.
Thirdly – and perhaps most importantly – there was a visible and dramatic upsurge of voter activism on the Election Day. Without any large-scale centrally organized campaign, hundreds of volunteers went to polling stations to work as election observers. They witnessed, prevented and/or reported hundreds of violations by electoral officials via social networks (despite coordinated DDoS attacks on the most important networks and popular news sites on the Election Day) and via You Tube. By December 5, some of the You Tube clips showing electoral fraud had more than 1,000,000 hits.
Reported Results and Corrections for Voter Fraud
As is always the case in a semi-democratic state, result of the official count may deviate significantly from how people actually voted. In Russia, the parliament is formed by representatives of political parties: voters vote for party lists, rather than for individual candidates. The officially announced results were: 49.5 percent for United Russia, 19.2 for Communist party, 13.2 for Just Russia, and 11.7 for the Liberal Democrats (Vladimir Zhirinovsky). Other parties, including Yabloko, the only liberal-leaning party that was allowed to participate in elections, fell short of the 7 percent required to enter parliament. However, the observations of international observers concur with those of opposition parties and independent Russian observers: ballot stuffing in favor of United Russia was witnessed/recorded and was widespread; electoral laws, draconian in themselves, were grossly violated by state officials, including police, at polling stations. In a number of cases, the elections results certified by local election boards do not coincide with the data presented by the central electoral commission, with every major discrepancy being in favor of United Russia.
Results obtained by the Citizen Observer project, which brought about 500 Moscovites to 160 polling stations as observers, give an impression of the scale of the fraud. Unfortunately, the project did not use a randomized distribution of observers, which would make the sample statistically representative of the whole of Moscow. However, Moscow districts have demonstrated fairly homogenous voting patterns in the last two decades, and there is no reason to think that any major change in this pattern occurred, so the report offers a fairly reliable estimate of election fraud. Averaging across polling stations where the observers did not report any serious violations, the Communist party won 25.3 percent of votes, United Russia 23.4, Just Russia and Yabloko 17.6 percent each, and the Liberal Democrats 12.5 percent. Turnout was 49 percent.
I would therefore estimate the effects of irregularities at 10 percentage points, i.e. the real share of votes cast for United Russia nationwide would be 39 percent rather than the reported 49 percent. But it would be reasonable to suppose the effect of irregularities at between 7 and 15 percentage points, so real votes for United Russia would be between 34 and 42 percent of votes cast. It is conceivable that the real share of votes cast for the Communist Party in Moscow (19.4 percent in official returns) was close to that of United Russia; it is not inconceivable that the Communists won the majority of real (not “counted”) votes by Moscovites.
Explanations
Following such a major surprise, any explanation offered only three days after the event risks being way off mark. Public opinion surveys predicted a significantly larger plurality for United Russia. (Personally, I have doubts about the quality of surveys of electoral intentions by major Russian polling firms. I find it particularly disturbing that, in the past, such firms have proved good at predicting – supposedly based on voter intentions – the reported results, rather than the results as adjusted by a realistic estimate of electoral fraud.)
The most obvious explanation for the United Russia setback is economic. Russia suffered more than any other G20 country as a result of the world financial crisis in 2008-09: an EBRD Transition Report 2011 found, based on an extensive survey of Russian citizens, that 38 percent of households had to cut their food consumption as a result of the crisis (11 percent of West European households were affected the same way). This is a major impact. In a democracy, such economic impact alone would most probably result in loss of power for the incumbent leadership.
Another explanation is growing discontent among Russians with the harshness of Putin’s administration and with rampant corruption. When oil prices were rising and real incomes were growing by double digits, the Russian public exhibited markedly high tolerance even when political decisions ran contrary to the will of the majority (for example, no opinion survey in five years showed majority approval of the abolition of regional gubernatorial elections, which was a cornerstone of Putin’s political changes) or when they had to pay substantial corruption premiums in the marketplace. In harder times, people are less willing to have their wishes ignored or to tolerate high and rising prices.
Consequences
In the Yeltsin era, such an outcome of parliamentary elections (even by the official count, United Russia lost almost 13 million votes as compared to 2007) would have triggered a major change in the composition of the cabinet. In 2011, there is even more reason for such a change: a number of prominent cabinet members, who had remits to run United Russia slates in specific provinces led their slates to dismal results (low 30s by the official count). However, low mobility in the upper echelons of the Russian elite during the last decade suggests that drastic changes in the near future are unlikely.
More important than the loss of seats in parliament for United Russia is the possibility that Vladimir Putin, the current prime minister with de facto presidential powers and the head of United Russia, is no longer assured a safe victory in March 2012 presidential elections, which looked a foregone conclusion just a couple of months ago. He is still arguably the favorite, even if (very improbably) there is no ban on opposition candidates participating in the elections (in 2008, the field was restricted to three contenders, all of them effectively pseudo-candidates; in 2004, other candidates were de facto prohibited from raising money for the campaign, while the incumbent had the full capacity of the state at his disposal). With a ban on opposition participation, he is the overwhelming favorite. However, we do not rule out an initiative by the government to make outcome of presidential elections even more secure in the near future by a major crackdown on the opposition.
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