The Effect of Newspaper Entry and Exit on Firm Behavior

Abstract

National newspapers maintain regional bureaus that allow them to engage in investigative journalism into corporate malfeasance hundreds of miles away from their New York City headquarters. These bureaus open and close over time, facilitating an examination of newspaper entry and exit within local markets. We examine the impact of the 2009 closing of the Wall Street Journal’s Boston bureau on financial misreporting. We find that after the closing of the bureau, local firms are more likely to have financial misstatements. These effects are driven by irregularities (i.e., material misstatements), suggesting that the business press plays a watchdog role. We also examine the impact of the 2020 opening of New York Times’s Nashville bureau on financial misreporting. We find that after the opening of the bureau, local firms are less likely to have financial misstatements. These effects are driven by errors (i.e., immaterial misstatements), suggesting firms make minor changes to placate the general-interest media but do not change more substantive financial misreporting. Our collective evidence suggests that regional bureaus of business and general-interest national media play a distinct role in shaping financial misreporting.