Study: Newspaper closings leads to more corporate misdoings

The closing of local newspapers results in more corporate misdeeds, according to research by Harvard Business School professor Jonas Heese.

Avery Forman of Harvard Business School writes, “In a study of thousands of facilities of publicly listed firms, Heese identified the towns where the local newspaper presses permanently came to a halt. Heese found that after a newspaper shuts down, violations at publicly listed companies in the paper’s circulation area increased by 1.1 percent and penalties from regulators rose by 15 percent. He also found that the nature of many violations was more severe in towns without newspapers.

“‘If you can do whatever you want and no one is looking, you’re more likely or more willing to engage in fraud,’ says Heese. ‘If the local media doesn’t make a fuss, you can pay the penalty to regulators without it affecting your reputation.’

“The paper, When the Local Newspaper Leaves Town: The Effects of Local Newspaper Closures on Corporate Misconduct, confirms that the press serves as a watchdog and keeps businesses in check. Heese, the Marvin Bower Associate Professor of Business Administration at Harvard Business School, teamed up with Gerardo Perez-Cavazos at the University of California San Diego’s Rady School of Management and Caspar David Peter at the Rotterdam School of Management to conduct the research.”

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