A Tale of Two Runs: Depositor Responses to Bank Solvency Risk

46 Pages Posted: 5 Sep 2014 Last revised: 6 Sep 2014

See all articles by Rajkamal Iyer

Rajkamal Iyer

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Manju Puri

Duke University - Fuqua School of Business; NBER; FDIC

Nicholas Ryan

Harvard University; Abdul Latif Jameel Poverty Action Lab Global

Date Written: September 4, 2014

Abstract

Using depositor-level data, we examine whether depositor actions reflect solvency risk for a bank that faced runs. We find that depositors with loans and bank staff are less likely than others to run in a low solvency-risk shock, but relatively more likely to in a high solvency-risk shock. Uninsured depositors always run more and this difference grows markedly in a high solvency-risk shock. In contrast, depositors with older accounts run less, and those with more frequent past transactions run more, irrespective of the underlying solvency risk. Our results show how depositor composition affects bank fragility and help characterize stable deposits.

Keywords: depositor runs, bank solvency risk, lending relationship

Suggested Citation

Iyer, Rajkamal and Puri, Manju and Ryan, Nicholas, A Tale of Two Runs: Depositor Responses to Bank Solvency Risk (September 4, 2014). Available at SSRN: https://ssrn.com/abstract=2491591 or http://dx.doi.org/10.2139/ssrn.2491591

Rajkamal Iyer (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

Manju Puri

Duke University - Fuqua School of Business ( email )

100 Fuqua Drive
Box 90120
Durham, NC 27708-0120
United States
919-660-7657 (Phone)

NBER

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

FDIC ( email )

550 17th Street NW
Washington, DC 20429
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Nicholas Ryan

Harvard University

K239 1737 Cambridge St
Cambridge, MA 02138
United States

Abdul Latif Jameel Poverty Action Lab Global ( email )

79 JFK Street
Cambridge, MA 02138
United States
617-254-1830 (Phone)

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