Disclosure of Bank-specific Information and the Stability of Financial Systems

Liang Dai, Dan Luo, Ming Yang, Disclosure of Bank-Specific Information and the Stability of Financial Systems, The Review of Financial Studies, Volume 37, Issue 4, April 2024, Pages 1315–1367, https://doi.org/10.1093/rfs/hhad089

86 Pages Posted: 2 Mar 2021 Last revised: 26 Mar 2024

See all articles by Liang Dai

Liang Dai

The Chinese University of Hong Kong, Shenzhen (CUHK-Shenzhen)

Dan Luo

The Chinese University of Hong Kong Business School

Ming Yang

UCL

Date Written: November 7, 2023

Abstract

We find that disclosing bank-specific information reallocates systemic risk, but whether it mitigates systemic bank runs depends on the nature of information disclosed. Disclosure reveals banks' resilience to adverse shocks, and shifts systemic risk from weak to strong banks. Yet, only disclosure of banks' exposure to systemic risk can mitigate systemic bank runs because it shifts systemic risk from more vulnerable banks to those less vulnerable. Disclosure of banks' idiosyncratic shortfalls of funds does not differentiate such exposure, rendering the resulting reallocation of systemic risk ineffective in mitigating systemic runs.

Keywords: information design, global games with heterogeneous agents, financial stability

JEL Classification: D83, G01, G21, G28

Suggested Citation

Dai, Liang and Luo, Dan and Yang, Ming, Disclosure of Bank-specific Information and the Stability of Financial Systems (November 7, 2023). Liang Dai, Dan Luo, Ming Yang, Disclosure of Bank-Specific Information and the Stability of Financial Systems, The Review of Financial Studies, Volume 37, Issue 4, April 2024, Pages 1315–1367, https://doi.org/10.1093/rfs/hhad089, Available at SSRN: https://ssrn.com/abstract=3762941 or http://dx.doi.org/10.2139/ssrn.3762941

Liang Dai

The Chinese University of Hong Kong, Shenzhen (CUHK-Shenzhen)

Dan Luo

The Chinese University of Hong Kong Business School ( email )

Cheng Yu Tung Building
12 Chak Cheung Street
Shatin, N.T.
Hong Kong

Ming Yang (Contact Author)

UCL ( email )

Drayton House, 30 Gordon Street
30 Gordon Street
London, WC1H 0AX
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
495
Abstract Views
1,790
Rank
108,666
PlumX Metrics