Behavior of Corporate Depositors during a Bank Panic
Management Science
65 Pages Posted: 20 Jun 2017 Last revised: 14 Jan 2022
Date Written: November 20, 2021
Abstract
We utilize high-frequency data to study access and response to bank-level information by corporate depositors during a banking crisis. We examine a bank panic episode in Russia during Summer 2004 triggered by the Central Bank announcement to liquidate banks for suspicious operations. Our results support the presence of sophisticated depositor monitoring and discipline. Private information about bank risk is available to depositor-firms with a strong business connection to their bank. Other corporate depositors make withdrawals based on publicly observable bank characteristics. Corporate depositors (both with and without strong business ties to the bank) are also susceptible to rumors floating around the banking community. However, those rumors reflect bank-risk fundamentals. Contagion effects seem to be limited.
Keywords: Bank panic, corporate depositors, bank-firm connections, market discipline, regulatory discipline
JEL Classification: G21, G38, H26
Suggested Citation: Suggested Citation