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

71 Pages Posted: 15 May 2018 Last revised: 12 Oct 2020

See all articles by Pengjie Gao

Pengjie Gao

University of Notre Dame - Mendoza College of Business

Chang Lee

Korea Advanced Institute of Science and Technology (KAIST) - College of Business

Dermot Murphy

University of Illinois at Chicago

Date Written: February 12, 2019

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 (February 12, 2019). Journal of Financial Economics, (2020) vol. 135, no. 2, 445-467, 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)

HOME PAGE: http://​sites.google.com/site/gpengjie/

Chang Lee

Korea Advanced Institute of Science and Technology (KAIST) - College of Business ( email )

85 Hoegiro Dongdaemun-Gu
Seoul 02455
Korea, Republic of (South Korea)

Dermot Murphy

University of Illinois at Chicago ( email )

2114 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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