Bank Runs And Media Freedom: What You Don’t Know Won’t Hurt You?

32 Pages Posted: 16 Feb 2021

See all articles by Alexander Benov

Alexander Benov

affiliation not provided to SSRN

Maria Semenova

National Research University Higher School of Economics

Date Written: February 16, 2021

Abstract

During periods of financial turmoil, depositor behaviour is influenced by the economic information environment, which is largely formed by the media—at least for retail depositors. Therefore the severity of bank runs during financial crises, and their efficiency might be conditional on the volume of the bad news appearing in the media during a crisis. If the news flow remains unrestrained, then the probability of bank runs will increase due to the information sensitivity of depositors. Examining whether it is possible to reduce the severity of bank runs during a crisis by controlling the media, we use the panel data 28 countries from 2001 until 2016. We analyze the impact of media freedom on the growth rate of retail deposits: the major role in bank runs is usually played by unsophisticated individual depositors. Generally the results do not support the hypothesis that changes in the degree of media freedom directly influence behavioural strategies of retail depositors during financial crises. However information limitations may be an instrument to support the market discipline mechanisms: higher media freedom during crises seems to blur the information environment depositors make decisions in. Media restrictions could also prevent the financial literacy effect from dilution during financial crises, ensuring that market discipline is not further undermined.

Keywords: Media freedom, Bank runs, Crisis, Market discipline, Depositors.

JEL Classification: G21, G28

Suggested Citation

Benov, Alexander and Semenova, Maria, Bank Runs And Media Freedom: What You Don’t Know Won’t Hurt You? (February 16, 2021). Higher School of Economics Research Paper No. WP BRP 81/FE/2021, Available at SSRN: https://ssrn.com/abstract=3786721 or http://dx.doi.org/10.2139/ssrn.3786721

Alexander Benov

affiliation not provided to SSRN

Maria Semenova (Contact Author)

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

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