Local newspaper closures and financial adviser misconduct

Abstract

Using local newspaper closures as negative shocks to the local press, we find that financial advisers who are located in counties with newspaper closures are more likely to commit misconduct. We also find that social costs are the potential mechanism through which the local press affects adviser misconduct. Our extended analysis shows that advisers are more likely to move to counties with a weaker local press monitoring environment following their misconduct. Furthermore, firms located in counties with closure events experience a greater net inflow of advisers with misconduct records than those without. Our results suggest that local newspapers are an important monitor of individual unethical behaviors and highlight the importance of media for the local adviser market.