Bank instability: Interbank linkages and the role of disclosure

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dc.contributor Bank of Finland König-Kersting, Christian Trautmann, Stefan T. Vlahu, Razvan 2020-07-13T09:07:36Z 2020-07-13T09:07:36Z 2020
dc.identifier.isbn 978-952-323-341-6
dc.identifier.issn 1456-6184
dc.description.abstract We study the impact of disclosure about bank fundamentals on depositors’ behavior in the presence (and absence) of economic linkages between financial institutions. Using a controlled laboratory environment, we identify under which conditions disclosure is conducive to bank stability. We find that bank deposits are sensitive to perceived bank performance. While banks with strong fundamentals benefit from more precise disclosure, an opposing effect is present for solvent banks with weaker fundamentals. Depositors take information about economic linkages into account and correctly identify when disclosure about one institution conveys meaningful information for others. Our findings highlight both the costs and benefits of bank transparency and suggest that disclosure is not always stability enhancing.
dc.format.extent 48
dc.language.iso ENG
dc.relation.ispartofseries Bank of Finland Research Discussion Papers
dc.subject.other disclosure
dc.subject.other banks
dc.subject.other interbank linkages
dc.subject.other coordination
dc.subject.other beliefs
dc.title Bank instability: Interbank linkages and the role of disclosure
dc.type Paper
dc.identifier.urn URN:NBN:fi:bof-202007132243
dc.subject.jel D81
dc.subject.jel G21
dc.subject.jel G28 Bank of Finland Research Discussion Papers
dc.series.year 2020
dc.series.number 14/2020
dc.series.sortingnumber 0014 14.7.2020
dc.subject.yso pankit
dc.subject.yso vakaus
dc.subject.yso informaatio
bof-internal.includedInCRIS 1
dc.type.okm D4

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