Local newspaper closures and bank loan contracts
Zhiming Ma, Derrald Stice, Han Stice, Yue Zhang
Contemporary Accounting Research · 2025 · Volume 42 · Issue 3
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.
Keywords
bank loans, debt contracting, information generation, local media, local newspapers, monitoring, contrôle, emprunts bancaires, journaux locaux, médias locaux, production de l'information, recours à l'emprunt
Enable JavaScript for citation tools and additional paper interactions.