Crisis? What Crisis? Bank stability, financial development and propaganda

Ruben Enikolopov, Karolin Kirschenmann, Koen Schoors and Konstantin Sonin

No 24-085, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: How does government control over mass media affect banking system? Our theoretical model predicts that if the media are biased, depositors are less likely to run on their bank, but also less likely to deposit their money in the banking system in the first place. Empirically, we show that countries with more media freedom experience both more frequent banking crises and higher levels of financial development. We pin down the underlying mechanism with a case study from Russia's 1998 banking crisis. Banks in areas with more access to an independent TV channel saw their depositors return faster in the aftermath of the crisis, in line with the reasoning that the crisis revealed differences in media bias across TV channels and induced differences in financial development at the bank level.

Keywords: bank runs; systemic stability; media freedom; information manipulation (search for similar items in EconPapers)
JEL-codes: G01 G21 G51 H12 L82 O16 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:312573

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