Bank Transparency and Deposit Flows
74 Pages Posted: 1 Aug 2018 Last revised: 29 Jul 2022
Date Written: July 1, 2022
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: Suggested Citation