Contemporary Accounting Research Vol. 42 No. 3 2025

Local newspaper closures and bank loan contracts

Zhiming Ma¹; Derrald Stice²; Han Stice³; Yue Zhang⁴

¹ Guanghua School of Management Peking University Beijing China · ² HKU Business School, University of Hong Kong Pokfulam Hong Kong · ³ Costello College of Business, George Mason University Washington DC USA · ⁴ School of Accountancy, Central University of Finance and Economics Beijing China

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. This effect is more pronounced when there are fewer related lenders in the syndicate, when lenders have less prior lending experience in the local area, when the closed local newspapers are associated with increases in misconduct cases, and for institutional lenders who rely more heavily on others for monitoring. In addition, we observe that loan contract amendments become less frequent, while covenant strictness increases following newspaper closures. Our main findings are robust to various research design specifications and are not driven by deteriorating local economic conditions. Our findings suggest that local media still plays a significant role in the debt markets, even as society moves deeper into the internet era.

DOI

10.1111/1911-3846.13046

Volume

42

Issue

3

Pages

1620-1651

Language

en

Sources

openalex crossref

Cite

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