Risk Reporting and Bank Runs
AbstractIncreasing risk disclosure of banks, e.g., via risk reporting in their annual accounts, is high on the agenda. In this paper, I analyze whether risk reporting of banks shows only favorable effects, as regulatory authorities suppose, or whether there are also undesired effects. Following other studies on deposit contracts and bank runs, I concentrate on the impact on depositors’ withdrawal decisions and banks’ insolvency risk. My analysis shows mixed results: risk reporting does not generally lead to a decrease in banks’ risk exposure and the probability of bank runs, respectively. Instead, it induces higher insolvency risk under certain conditions, which I identify, and may even lower welfare.
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Bibliographic InfoArticle provided by LMU Munich School of Management in its journal Schmalenbach Business Review.
Volume (Year): 61 (2009)
Issue (Month): 1 (January)
Bank Run; Insolvency Risk; Risk Reporting;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting
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