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- Title
Optimal Reporting Systems in Bank Runs.
- Authors
Zhang, Gaoqing; Zheng, Ronghuo
- Abstract
We study the role of reporting systems in the context of bank runs. In our model, a bank receives an early but imprecise estimate of its investment performance, and its financial reporting system generates a report. We find that, from a financial-stability standpoint, the optimal reporting system requires full disclosure when the bank's early estimate is below a certain threshold, but no disclosure otherwise. Importantly, such optimal reporting threshold should be tailored to the bank's exposure to bank-run risk. In particular, the threshold is nonmonotonic and U-shaped in the bank-run risk. We also relate our results to current accounting standards and discuss their implications for policy-making and empirical research. JEL Classifications: G21; G28; M41; M48.
- Subjects
BANK runs; BANKING industry; BANKING industry finance; FINANCIAL disclosure; FINANCIAL statements
- Publication
Accounting Review, 2024, Vol 99, Issue 2, p457
- ISSN
0001-4826
- Publication type
Article
- DOI
10.2308/TAR-2021-0626