Understanding Bank Runs: The Importance of Depositor-Bank Relationships
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Iyer_Understanding bank.pdf
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2.04 MB
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Adobe PDF
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Author(s)
Iyer, Rajkamal
Puri, Manju
Date Issued
June 2012
Journal
American Economic Review
Publisher
American Economic Association
Citation
Iyer, Rajkamal, and Manju Puri. “Understanding Bank Runs: The Importance of Depositor-Bank Relationships and Networks.” American Economic Review 102.4 (2012): 1414–1445. Web.
Version
Final published version
Abstract
We use unique depositor-level data for a bank that faced a run to understand the factors that affect depositor behavior. We find uninsured depositors are most likely to run. Deposit insurance helps, but is only partially effective. Bank-depositor relationships mitigate runs, suggesting that relationship with depositors help banks reduce fragility. In addition, we also find that social networks matter. Finally, we find long-term effects of a solvent bank run in that depositors who run do not return back to the bank. Our results help understand the underlying dynamics of bank runs and hold important policy implications.
MIT Department
Sloan School of Management
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Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
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DOI of Published Version
https://doi.org/10.1257/aer.102.4.1414
