Bank Transparency and Deposit Flows

57 Pages Posted: 1 Aug 2018 Last revised: 16 May 2019

See all articles by Qi Chen

Qi Chen

Duke University - Fuqua School of Business

Itay Goldstein

University of Pennsylvania - The Wharton School - Finance Department

Zeqiong Huang

Yale School of Management

Rahul Vashishtha

Duke University

Date Written: May 2019

Abstract

How much information bank depositors should have on the assets of banks is a hotly debated issue. On the one hand, information allows depositors to monitor banks’ actions, but on the other hand, it might interfere with banks’ liquidity-transformation role. We provide, for the first time, empirical evidence that links transparency to deposit flows, deposit rates, banks’ investments and profitability. We demonstrate that uninsured deposits respond more strongly to performance when banks are more transparent, and provide other evidence consistent with the idea that transparency adversely affects banks’ unique role in creating safe assets for depositors.

Keywords: bank transparency, deposits, liquidity provision, opacity

JEL Classification: G21, M4, D80

Suggested Citation

Chen, Qi and Goldstein, Itay and Huang, Zeqiong and Vashishtha, Rahul, Bank Transparency and Deposit Flows (May 2019). 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)

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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