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Disclosure of Bank-Specific Information and the Stability of Financial Systems

Author

Listed:
  • Liang Dai
  • Dan Luo
  • Ming Yang
Abstract
We find that disclosing bank-specific information reallocates systemic risk, but whether it mitigates systemic bank runs depends on the nature of information disclosed. Disclosure reveals banks’ resilience to adverse shocks and shifts systemic risk from weak to strong banks. Yet, only disclosure of banks’ exposure to systemic risk can mitigate systemic bank runs because it shifts systemic risk from more vulnerable banks to those less vulnerable. Disclosure of banks’ idiosyncratic shortfalls of funds does not differentiate such exposure, rendering the resultant reallocation of systemic risk ineffective in mitigating systemic runs.

Suggested Citation

  • Liang Dai & Dan Luo & Ming Yang, 2024. "Disclosure of Bank-Specific Information and the Stability of Financial Systems," The Review of Financial Studies, Society for Financial Studies, vol. 37(4), pages 1315-1367.
    • Handle: RePEc:oup:rfinst:v:37:y:2024:i:4:p:1315-1367.
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    References listed on IDEAS

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    More about this item

    Keywords

    D83; G01; G21; G28;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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