Bank Transparency and Deposit Flows

74 Pages Posted: 1 Aug 2018 Last revised: 29 Jul 2022

See all articles by Qi Chen

Qi Chen

Duke University - Fuqua School of Business

Itay Goldstein

University of Pennsylvania - The Wharton School - Finance Department ; National Bureau of Economic Research (NBER)

Zeqiong Huang

Yale School of Management

Rahul Vashishtha

Duke University

Date Written: July 1, 2022

Abstract

One of the most widely discussed issues in banking regulation and research is transparency. Yet, whether depositors – banks’ most important claimholders – are affected by transparency, is an empirical open question. Analyzing US commercial banks from 1994-2019, we show that uninsured deposit flows are more sensitive to information about bank performance when banks are more transparent. We also link transparency to deposit rates, banks’ investment funding patterns, and profitability. In addition, we find consistent evidence from a differences-in-difference analysis using the Sarbanes-Oxley Act of 2002 as a shock to transparency. Overall, our findings demonstrate that transparency is important in shaping depositors’ behavior and highlight its potential costs.

Keywords: Transparency, Banks, Money, Safe assets, Deposits, Liquidity transformation

JEL Classification: G21, M4, D80

Suggested Citation

Chen, Qi and Goldstein, Itay and Huang, Zeqiong and Vashishtha, Rahul, Bank Transparency and Deposit Flows (July 1, 2022). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3212873 or http://dx.doi.org/10.2139/ssrn.3212873

Qi Chen

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
(919) 660-7753 (Phone)

Itay Goldstein

University of Pennsylvania - The Wharton School - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
215-746-0499 (Phone)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Zeqiong Huang

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

Rahul Vashishtha (Contact Author)

Duke University ( email )

Durham, NC 27708-0204
United States
919-660-7755 (Phone)
91-660-7971 (Fax)

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