Financing Dies in Darkness? The Impact of Newspaper Closures on Public Finance

59 Pages Posted: 15 May 2018 Last revised: 18 Aug 2018

Pengjie Gao

University of Notre Dame - Mendoza College of Business

Chang Lee

University of Illinois at Chicago - Department of Finance

Dermot Murphy

University of Illinois at Chicago - Department of Finance

Date Written: August 10, 2018

Abstract

We examine how local newspaper closures affect public finance outcomes for local governments. Following a newspaper closure, municipal borrowing costs increase by 5 to 11 basis points, costing the municipality an additional $650 thousand 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.

Keywords: media, monitoring, public financing, municipal bonds

JEL Classification: G12, G18, H74

Suggested Citation

Gao, Pengjie and Lee, Chang and Murphy, Dermot, Financing Dies in Darkness? The Impact of Newspaper Closures on Public Finance (August 10, 2018). Available at SSRN: https://ssrn.com/abstract=3175555 or http://dx.doi.org/10.2139/ssrn.3175555

Pengjie Gao (Contact Author)

University of Notre Dame - Mendoza College of Business ( email )

246 Mendoza College of Business
Notre Dame, IN 46556-5646
United States
(574) 631-8048 (Phone)

Chang Lee

University of Illinois at Chicago - Department of Finance ( email )

2431 University Hall (UH)
601 S. Morgan Street
Chicago, IL 60607-7124
United States

Dermot Murphy

University of Illinois at Chicago - Department of Finance ( email )

2431 University Hall (UH)
601 S. Morgan Street
Chicago, IL 60607-7124
United States
312-355-4372 (Phone)

HOME PAGE: http://sites.google.com/site/murphyderm

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