Financing Dies in Darkness? The Impact of Newspaper Closures on Public Finance
71 Pages Posted: 15 May 2018 Last revised: 12 Oct 2020
Date Written: February 12, 2019
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: Suggested Citation