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Depositors’ Behaviour in Times of Mass Deposit Withdrawals

Hubert Janos Kiss

Financial and Economic Review, 2018, vol. 17, issue 4, 95-111

Abstract: Based on empirical and experimental data, the study provides an overview of the literature on the behaviour of depositors. On this basis, it establishes that depositors’ decisions and thus the phenomenon of mass deposit withdrawals can be explained by fundamental problems as well as coordination among depositors. It points out that depositors’ heterogeneity matters, and the impact of individual characteristics depends on the existence of fundamental problems. Characteristics (such as education, financial sophistication, wealth, bank experience and connections) that make it likely that a depositor collects information on the bank reduce the chance of mass deposit withdrawal in the absence of fundamental problems, but increase the chance of mass deposit withdrawal in the case of such problems. The effect of social networks (and of the information flowing through such) also matters. Deposit insurance reduces the probability of bank runs, but is unable to eliminate them completely. Experimental findings are also in line with empirical experiences.

Keywords: bank run; depositor’s decision; empirical data; experiment; panic (search for similar items in EconPapers)
JEL-codes: C91 D8 G4 G21 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:mnb:finrev:v:17:y:2018:i:4:p:95-111