Press Freedom and Systemic Risk

This paper investigates the role of press freedom on systemic risk using an international sample of banks. We construct a novel and comprehensive measure of press freedom by integrating data from multiple widely recognized sources: the Reporters Without Borders Press Freedom country ranking, the Freedom of Expression Index, and the Freedom House Index. By combining these three distinct indices, our measure offers a more robust and multi‐dimensional assessment of press freedom, capturing a broader spectrum of factors influencing media independence and freedom of expression across countries. Our empirical evidence suggests that press freedom is associated with lower systemic risk in the banking sector. We show that this relationship is mitigated during the upward phase of the economic cycle, and enhanced during banking crises. Our findings hold when addressing potential endogeneity problems and when accounting for additional macroeconomic and firm controls.