When the local newspaper leaves town: The effects of local newspaper closures on corporate misconduct

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. (C) 2021 Elsevier B.V. All rights reserved.

Automated summary

This study examines the effectiveness of the local press as a monitor of corporate misconduct. The results show that local facilities of publicly listed firms increase violations and penalties after local newspaper closures, indicating a reduction in press monitoring. This effect is not influenced by economic conditions, local fraud environment, or firm conditions. Therefore, local newspapers play a crucial role in monitoring firms' misconduct.