UC Berkeley

This paper examines the capital market implications of media accessibility. I exploit the staggered adoption of digital paywalls, which charge readers for access to previously free online news content, by major U.S. local newspapers as a negative shock to media accessibility. Focusing specifically on the disclosure dissemination role of the media, I find that after the adoption of digital paywalls, firms that receive persistent earnings announcement media coverage from their local newspaper experience reduced abnormal trading volume, which is driven by a reduction in abnormal retail trading volume. Additionally, these firms experience reduced liquidity, and slower speed of price discovery. These results are driven by low-visibility firms for which local investors, the likely readers of local newspapers, are more likely to be the marginal investor. Using a placebo test, I show it is unlikely the results are driven by an unmodeled factor. While prior literature has extensively documented the capital market effects of earnings announcement media coverage, my findings underscore that the effects of media coverage depend on the accessibility of media content.