Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/240337 
Year of Publication: 
2020
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 14/2020
Publisher: 
Bank of Finland, Helsinki
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.
Subjects: 
Disclosure
Banks
Interbank linkages
Coordination
Beliefs
JEL: 
D81
G21
G28
Persistent Identifier of the first edition: 
ISBN: 
978-952-323-341-6
Document Type: 
Working Paper

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