University of Arkansas accounting professor Caleb Rawson has crunched the numbers of lost jobs in Arkansas newspaper newsrooms since 2001, and he calls them “mind-boggling.”
In 2001, Arkansas newsrooms had 4,059 employees. At the end of last year, there were only 954. “We’ve decreased 77% in newsroom jobs in just 20 years,” said Rawson, who says business readers are much the poorer for the loss. Literally.
A paper Rawson wrote with fellow UA accounting professor Kris Allee and Ryan Cating, a UA Ph.D. who is a professor at the University of Central Arkansas, argues that a decline in business coverage has undermined oversight of public companies in places where newspapers have shut down and downsized.
The paper, soon to be published in the Review of Accounting Studies, also argues that an information void left by the newspaper losses has made the jobs of stock analysts and dutiful investors harder.
Less local coverage of big companies leaves analysts and investors scrambling for information, and leaves corporations freer to issue forward-looking statements with reduced scrutiny. Financial forecasts and analysis have suffered.
The authors started work on the paper about two-and-a-half years ago, seeking to understand how the decrease in local newspapers affects information available about local public companies.
“A lot of newspapers have gone out of business and the ones still around are substantially smaller,” Rawson said in an interview. “A lot of relevant information comes from local newspapers on the ground in places that have company headquarters or manufacturing plants. What we found was that as newspaper employment decreased, public companies’ stock became more volatile, and the variation in their returns increased.”
The authors also found that less reporting yields more doubt about companies’ true value. Stock analysts making forecasts also started “doing a worse job as more local newspapers went away,” Rawson said.
“We feel it presents a pretty compelling argument that local newspapers are really important for public companies, and that we’re starting to see that impact in the market as less information about the firm gets published.”
The study was nationwide, and the numbers were consistent.
“We looked at how many local newspaper employees there were in the areas around every company’s headquarters — around 85% to 90% of public companies have a local newspaper,” Rawson said. “Nationwide, there’s around a 74% to 75% decrease in newspaper jobs. And so the 76% decrease we have in Arkansas is pretty representative.”
He said the dearth of reporting makes business less reliable and lets local governments operate in darkness.
“There’s research in economics and finance that finds that as local newspapers close, local governments become less efficient and there is more government and corporate misconduct. That makes sense because journalists aren’t showing up at public meetings.”
He said his students rarely read printed newspapers, and noted that the traditional general-interest newspaper model of mining revenue from advertisers is diminished in the internet age. In 2022 just three companies, Google, Meta and Amazon, got 60% of all online ad money, according to Statista. U.S. newspaper ad revenue estimated at $50 billion in 2005 had fallen to about $9.6 billion in 2020. “It feels to me that there’s a lower level of general interest in local politics and business than there has been, and people need to be interested,” Rawson said. “It’s kind of discouraging to think about.”