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Should regulators always be transparent? A bank run experiment

Surajeet Chakravarty, Lawrence Choo, Miguel A. Fonseca and Todd Kaplan ()

MPRA Paper from University Library of Munich, Germany

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. Our evidence illustrates the importance of contemporary financial disclosure regulations.

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: 2020-03
New Economics Papers: this item is included in nep-exp
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