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Review of Financial Studies Vol. 37 No. 4 2024

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

Liang Dai1; Dan Luo2; Ming Yang3

1 School of Management and Economics and Shenzhen Finance Institute, The Chinese University of Hong Kong , Shenzhen, China · 2 CUHK Business School, The Chinese University of Hong Kong, Hong Kong, China · 3 Department of Economics and School of Management, University College London , United Kingdom

open access

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.

DOI
10.1093/rfs/hhad089
Volume
37
Issue
4
Pages
1315-1367
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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