Financing dies in darkness? The impact of newspaper closures on public finance |
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| Institution: | 1. Department of Finance, University of Notre Dame, 246 Mendoza College of Business, Notre Dame, IN 46556, USA;2. Korea Advanced Institute of Science and Technology (KAIST), College of Business, 85 Hoegiro, Dongdaemun-gu, Seoul, 02455, Korea;3. Department of Finance, University of Illinois at Chicago, College of Business, 601 South Morgan Street, Chicago, IL 60607-7121, USA;1. London Business School, Regents Park, London NW1 4SA, United Kingdom;2. Oregon State University, Austin Hall #430, 2751 SW Jefferson Way, Corvallis, OR 97331, United States;3. Marriott School of Business, Brigham Young University, 556 Tanner Building, Provo, UT 84602, United States;1. Nanyang Business School, Nanyang Technological University, Singapore;2. Institute of Accounting and Finance, School of Accountancy, Shanghai University of Finance and Economics, China;3. Faculty of Business and Economics, The University of Hong Kong, Hong Kong, China;1. Department of Finance, Stockholm School of Economics, Box 6501, 11383 Stockholm, Sweden;1. Huazhong University of Science and Technology, People''s Republic of China;2. Cambridge Judge Business School, University of Cambridge, Trumpington Street, Cambridge CB2 1AG, United Kingdom;3. Hong Kong Baptist University, Hong Kong SAR, People’s Republic of China;1. Lundquist College of Business, University of Oregon, Eugene, OR 97403, United States;2. Department of Business & Information Technology, Missouri S&T, Rolla, MO 65409, United States |
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| Abstract: | We examine how local newspaper closures affect public finance outcomes for local governments. Following a newspaper closure, municipal borrowing costs increase by 5–11 basis points, costing the municipality an additional $650,000 per issue. This effect is causal and not driven by underlying economic conditions. The loss of government monitoring resulting from a closure is associated with higher government wages and deficits and increased likelihoods of costly advance refundings and negotiated sales. Overall, our results indicate that local newspapers hold their governments accountable, keeping municipal borrowing costs low and ultimately saving local taxpayers money. |
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