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

47 Pages Posted: 15 May 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: May 8, 2018

Abstract

Local newspapers hold their governments accountable. We examine the effect of local newspaper closures on public finance for local governments. Following a newspaper closure, we find municipal borrowing costs increase by 5 to 11 basis points in the long run. Identification tests illustrate that these results are not being driven by deteriorating local economic conditions. The loss of monitoring that results from newspaper closures is associated with increased government inefficiencies, including higher likelihoods of costly advance refundings and negotiated issues, and higher government wages, employees, and tax revenues.

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 (May 8, 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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