Understanding Bank Runs: The Importance of Depositor-Bank Relationships
Author(s)Iyer, Rajkamal; Puri, Manju
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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.
DepartmentSloan School of Management
American Economic Review
American Economic Association
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.
Final published version