Local Newspaper Closures and Bank Loan Contracts

63 Pages Posted: 28 Jan 2022 Last revised: 11 Aug 2022

See all articles by Zhiming Ma

Zhiming Ma

Peking University

Derrald Stice

The University of Hong Kong - School of Business

Han Stice

The Chinese University of Hong Kong

Yue Zhang

Central University of Finance and Economics (CUFE) - School of Accountancy

Date Written: August 9, 2022

Abstract

We examine changes in bank loan contracts after borrowers experience a nearby local newspaper closure. Compared to a sample of control firms, we find that the closure of a local newspaper leads to higher interest spreads for borrowers. The effect is stronger when the local newspaper is more important for information generation, when the borrower’s information environment is poor, when accounting quality is low, or when external monitoring is weak. We show that this effect is robust to different research design specifications, and that it is not related to deteriorating local economic conditions. Our findings suggest that local media still plays a significant monitoring role in the debt markets, even as society moves deeper into the internet era.

Keywords: Local Newspapers, Local Media, Bank Loans, Debt Contracting, Firm Monitoring, Accounting Quality

JEL Classification: G10, G21, G32

Suggested Citation

Ma, Zhiming and Stice, Derrald and Stice, Han and Zhang, Yue, Local Newspaper Closures and Bank Loan Contracts (August 9, 2022). Available at SSRN: https://ssrn.com/abstract=4014321 or http://dx.doi.org/10.2139/ssrn.4014321

Zhiming Ma

Peking University ( email )

Department of Accounting
Guanghua School of Management
Beijing, 100871
China

Derrald Stice (Contact Author)

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

Yue Zhang

Central University of Finance and Economics (CUFE) - School of Accountancy ( email )

Beijing
China

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