A Comparison Between Local and National Reporting of Corporate Fraud

Abstract

The United States media landscape is characterized by two different types of media outlets, local and national. This study examines how local media differ from national media in the dissemination and interpretation of corporate frauds. Using a local firm's AAER as a setting of fraud, I find that local reports are more original as measured by textual dissimilarity to exiting media content. In particular, textual analysis indicates that local reports are more negative, put more emphasis on litigation topics and less on executive-related topics. In addition, the different content in local reports is informative to investors, as local reports reduce information asymmetry and resolve market uncertainty more than national reports do. This study builds on the recent literature that shows the effectiveness of local media, but does not distinguish between the ex ante deterrence effect from the ex post interpretation effect of media coverage. My study explicitly identifies the ex post channel and provides one of the first evidence comparing local versus national media.