When the Local Newspaper Leaves Town: The Effects of Local Newspaper Closures on Corporate Misconduct

52 Pages Posted: 9 Aug 2021

See all articles by Jonas Heese

Jonas Heese

Harvard University - Business School (HBS)

Gerardo Perez Cavazos

University of California, San Diego (UCSD)

Caspar David Peter

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM)

Date Written: July 21, 2021

Abstract

We examine whether the local press is an effective monitor of corporate misconduct. Specifically, we study the effects of local newspaper closures on violations by local facilities of publicly listed firms. After a local newspaper closure, local facilities increase violations by 1.1% and penalties by 15.2%, indicating that the closures reduce firm monitoring by the press. This effect is not driven by the underlying economic conditions, the underlying local fraud environment, or the underlying firm conditions. Taken together, our findings indicate that local newspapers are an important monitor of firms’ misconduct.

Keywords: corporate misconduct, local newspapers, media coverage

JEL Classification: M40, M41, M46

Suggested Citation

Heese, Jonas and Perez Cavazos, Gerardo and Peter, Caspar David, When the Local Newspaper Leaves Town: The Effects of Local Newspaper Closures on Corporate Misconduct (July 21, 2021). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3889039 or http://dx.doi.org/10.2139/ssrn.3889039

Jonas Heese (Contact Author)

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Morgan Hall 397
Boston, MA 02163
United States

Gerardo Perez Cavazos

University of California, San Diego (UCSD) ( email )

9500 Gilman Drive
La Jolla, CA 92093
United States

Caspar David Peter

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T10-49
3062 PA Rotterdam, 3062 PA
Netherlands

HOME PAGE: http://www.rsm.nl/people/caspar-david-peter/

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