The Accounting Review Vol. 99 No. 2 2024
Optimal Reporting Systems in Bank Runs
Abstract
We study the role of reporting systems in the context of bank runs. In our model, a bank receives an early but imprecise estimate of its investment performance, and its financial reporting system generates a report. We find that, from a financial-stability standpoint, the optimal reporting system requires full disclosure when the bank’s early estimate is below a certain threshold, but no disclosure otherwise. Importantly, such optimal reporting threshold should be tailored to the bank’s exposure to bank-run risk. In particular, the threshold is nonmonotonic and U-shaped in the bank-run risk. We also relate our results to current accounting standards and discuss their implications for policy-making and empirical research.
- DOI
- 10.2308/tar-2021-0626
- Volume
- 99
- Issue
- 2
- Pages
- 457-481
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref