Anyone Monitoring? How Vanishing Local Newspapers Affect Firms’ Debt Structure
36 Pages Posted: 3 Jun 2016 Last revised: 22 Dec 2016
Date Written: December 21, 2016
This paper sheds light on the economic consequences of newspaper bankruptcies and closures by analyzing how reduced local monitoring due to such "shocks'' affects firms' choice between public and private debt. For this, we compare the impact of newspaper shocks on geographically close firms with weak analyst or nationwide press coverage to firms which are less dependent on local monitoring. We find that reduced local monitoring leads to a shift from public to private debt and higher bond yields for treated firms. For identification, we rely on shocks due to non-local reasons, local matching, and size-corrected treatment measures. These findings indicate that the decline of newspapers will affect firms' financing.
Keywords: Debt structure, public vs. private debt, local monitoring, newspapers
JEL Classification: G30, G32, D82
Suggested Citation: Suggested Citation