This study examines the informational role of local newspapers in institutional investments. Exploring local newspaper closures across U.S. counties, we document that institutional investors significantly reduce their holdings in firms located near closed newspapers. The post-closure decrease in institutional holdings is concentrated for nonlocal or non-hedge fund institutions. In contrast, institutions that are likely to possess information advantages—local institutions or hedge funds—do not decrease or even increase their holdings facing the newfound lack of local news coverage. Further analysis reveals that local newspaper closures adversely impact the institutional investors’ ability to predict firms’ stock returns—particularly for nonlocal or non-hedge fund institutions. Collectively, we provide novel evidence suggesting that local newspapers are a key channel through which institutional investors acquire geographically scattered information.​

Keywords: Local Newspapers, Institutional Investors, Information Acquisition

JEL Classification: D80, G11, G14, M40​