Social Media as a Bank Run Catalyst

Abstract

After the run on Silicon Valley Bank (SVB), U.S. regional banks entered a period of significant distress. We quantify social media's role in this distress using comprehensive Twitter data.  During the SVB run period, banks with high pre-existing exposure to Twitter lost 4.3 percentage points more stock market value. Moreover, Twitter pre-exposure interacts significantly with classical run risks to predict greater run severity and greater deposit outflows during Q1 2023, effects unexplained by other banking or market characteristics. At the hourly frequency during the run, high Twitter attention over the past four hours predicts stock market losses, especially for banks with high run risks.  By contrast, we find that negative Twitter sentiment does not amplify bank run risks.  Rather, our evidence points to a distinctive role of Twitter attention by tech community members who are likely depositors in SVB, as well as tweets that mention running and contagion. 

Keywords: Bank Runs, Social Media, Social Finance, FinTech

JEL Classification: F30, F36, G38, Q50