Should regulators always be transparent? a bank run experiment
Surajeet Chakravarty,
Lawrence Choo,
Miguel Fonseca and
Todd Kaplan
European Economic Review, 2021, vol. 136, issue C
Abstract:
We study, using laboratory experiments, the extent to which disclosure policies about the financial health of a bank affect the likelihood of a bank run. We consider two disclosure regimes, full disclosure and no disclosure, under two scenarios: one in which the bank is on average financially solvent and another in which the bank is on average insolvent. When the bank is on average insolvent, the full disclosure regime reduces the expected likelihood of runs. In contrast, when the bank is on average solvent, the full disclosure regime increases the expected likelihood of runs. We also find that disclosing identical information when depositors’ expectations are low versus high (good versus bad news) leads to behavioural differences only indirectly through their beliefs about the other depositor’s actions. Our findings show that instituting a policy of greater banking transparency is not always beneficial.
Keywords: Bank runs; Banking crises; Public policy; Information disclosure (search for similar items in EconPapers)
JEL-codes: C72 C92 G18 G21 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0014292121001173
Full text for ScienceDirect subscribers only
Related works:
Working Paper: Should regulators always be transparent? A bank run experiment (2020) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:136:y:2021:i:c:s0014292121001173
DOI: 10.1016/j.euroecorev.2021.103764
Access Statistics for this article
European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer
More articles in European Economic Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().