Governance by Depositors, Bank Runs and Ambiguity Aversion: A Theoretical Approach
François Guillemin (72fguillemin@gmail.com)
HSE Working papers from National Research University Higher School of Economics
Abstract:
We investigate the theoretical relationship between ambiguity aversion and the decision to withdraw early from a deposit contract. We first document and define the concepts to illustrate our results. Then we extend the theoretical framework of Gorton (1985) to implement a model of maxmin expected utility to match the ambiguity aversion hypothesis. We observe that the most ambiguous depositors are more likely to mistakenly withdraw their deposits, reducing bank stability and leading to inefficient bank runs. We also show higher ambiguity levels negatively impact bank equity levels
Keywords: Banking governance; ambiguity aversion; depositor's behaviour; bank runs (search for similar items in EconPapers)
JEL-codes: G02 G18 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2018
New Economics Papers: this item is included in nep-upt
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Published in WP BRP Series: Financial Economics / FE, August 2018, pages - 31
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https://wp.hse.ru/data/2018/08/13/1154941129/68FE2018.pdf (application/pdf)
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Persistent link: https://EconPapers.repec.org/RePEc:hig:wpaper:68/fe/2018
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