No. 195: Local Newspaper Closures and their Effect on Lending Discrimination

In this study, we examine how changes in the local information environment influence organizational decision-making, focusing on the discriminatory behavior of frontline employees. Leveraging a staggered difference-indifferences design, we exploit the closures of local newspapers across U.S. counties between 2009 and 2022 to assess how these closures on discriminatory behavior in mortgage lending. Analyzing over 187 million loan applications, we find that the loss of local journalism is associated with significantly higher denial rates for applicants who are ethnic minorities or women, even after controlling for loan and applicant characteristics, bank fixed effects, and local economic trends. We find stronger effects in more heterogenous communities, pointing to local journalism as a unifying force in otherwise fragmented counties. Our findings, accompanied by a multitude of robustness checks, suggest that continuous information treatments via local newspapers play a critical role in indirectly reducing discriminatory practices. These results highlight how persistent, community-level information exposure can shape ethical behavior in organizations, offering important implications for firms and policymakers seeking to enhance equitable practices.