 Running for the Exit: Community Cohesion and Bank PanicsHenrich R. Greve () and
Ji-Yub (Jay) Kim ()
Organization Science, 2014, vol. 25, issue 1, 204-221 Abstract: Bank panics attract scholarly interest because they reflect distrust of each bank that experiences a run as a result of diffusion of information; rumors about such bank runs trigger additional runs elsewhere. However, the contagion of bank runs is highly selective for reasons that are unrelated to the financial strength of the individual banks. This presents a puzzle that extant theories on institutions and reputations cannot fully explain. To solve this puzzle, we turn to the characteristics of the community in which the banks operate. We develop theory on how communities with diverse affiliation structures and economic inequality have weaker community cohesion and communication, making such communities less likely to experience widespread distrust and hence bank runs. We test hypotheses on the effects of community ethnic diversity, national origin diversity, religious diversity, and wealth inequality using data from the great bank panic of 1893, and we find strong community effects on bank runs. These findings suggest that the contagion of distrust in organizations following adverse events is channeled by community differences as well as organizational differences. Keywords: information diffusion; distrust; community diversity; demographic heterogeneity; bank panic; bank run (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:inm:ororsc:v:25:y:2014:i:1:p:204-221 Access Statistics for this article More articles in Organization Science from INFORMS Contact information at EDIRC. |
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