Stop the Presses! Or Wait, We Might Need Them: Firm Responses to Local Newspaper Closures and Layoffs

54 Pages Posted: 10 Jun 2019 Last revised: 9 Dec 2021

See all articles by Min Kim

Min Kim

Sogang University

Derrald Stice

The University of Hong Kong - School of Business

Han Stice

The Chinese University of Hong Kong

Roger M. White

Arizona State University (ASU) - School of Accountancy

Date Written: June 28, 2021

Abstract

Media as a whole has been shown to play an important role as an information source, information intermediary, and monitor of public firms, but much less is known about whether local newspapers play a similar role. We attempt to shed light on this issue, and we investigate if and how firms respond to changes in the local newspaper industry, where closures and layoffs have become the norm. Compared to a sample of matched control firms, we find that following newspaper closures and large industry layoffs, nearby public companies boost dividend payouts. This result follows from prior research suggesting that investors pressure managers to increase dividends in response to growing agency problems. Cross-sectional analyses confirm that our results are driven by geographically-concentrated firms that rely more heavily on local newspapers as a monitor and information source. Our findings suggest that local newspapers play an important role as an information intermediary and monitor of public firms, and that the disappearance of local newspapers exacerbates agency problems in nearby firms that tend to be remedied by higher dividends.

Keywords: Newspapers, Local Media, Disclosure, Monitoring, Agency Problems, Dividend Policy

JEL Classification: M41, L82, G35

Suggested Citation

Kim, Min and Stice, Derrald and Stice, Han and White, Roger M., Stop the Presses! Or Wait, We Might Need Them: Firm Responses to Local Newspaper Closures and Layoffs (June 28, 2021). Journal of Corporate Finance, 2021 (vol. 69, article no. 102035), Available at SSRN: https://ssrn.com/abstract=3393199 or http://dx.doi.org/10.2139/ssrn.3393199

Min Kim

Sogang University ( email )

Seoul 121-742
Korea, Republic of (South Korea)

Derrald Stice

The University of Hong Kong - School of Business ( email )

Meng Wah Complex
Pokfulam Road
Hong Kong
China

Han Stice

The Chinese University of Hong Kong ( email )

Shatin, N.T.
Hong Kong

Roger M. White (Contact Author)

Arizona State University (ASU) - School of Accountancy ( email )

Tempe, AZ 85287
United States

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