Financing Dies in Darkness? The Impact of Newspaper Closures on Public Finance: Internet Appendix

摘要: In this section, we examine the effect of newspaper closures on call-adjusted municipal bond yields. Approximately 60% of the municipal bonds in our sample period are callable. For these bonds, the issuer has the right to repurchase the bond at a pre-specified strike price on a future date. The holder of the callable bond essentially has a long position in the straight municipal bond and a short position in the embedded call option. A callable municipal bond is priced lower than the equivalent straight municipal bond because the call option is valuable to the issuer; in other words, the yield on a callable municipal bond is higher than the yield on the straight municipal bond. The evidence in our paper indicates that newspaper closures significantly affect municipal bond yields, mainly through the government inefficiency channel. An alternative possibility is that newspaper closures generate uncertainty in the local …