Pub Date : 2024-10-28DOI: 10.1016/j.jfs.2024.101345
Incheol Kim , Suin Lee , Jiwoo Ryou
We examine how climate risk influences analyst forecast accuracy proxied by forecast error and dispersion. Using country-level climate risk estimated with time trends in droughts, we find that analyst forecasts are less accurate for firms in drought-prone countries. This effect of climate risk is stronger when climate risks are denoted in earnings forecasts, and when firms’ home countries have greater reliance on hydroelectric sources in electricity generation, more important agricultural and food industries, and active stances concerning climate change. Overall, our findings suggest noteworthy implications of climate risk on the financial markets via analyst forecast accuracy.
{"title":"Does climate risk influence analyst forecast accuracy?","authors":"Incheol Kim , Suin Lee , Jiwoo Ryou","doi":"10.1016/j.jfs.2024.101345","DOIUrl":"10.1016/j.jfs.2024.101345","url":null,"abstract":"<div><div>We examine how climate risk influences analyst forecast accuracy proxied by forecast error and dispersion. Using country-level climate risk estimated with time trends in droughts, we find that analyst forecasts are less accurate for firms in drought-prone countries. This effect of climate risk is stronger when climate risks are denoted in earnings forecasts, and when firms’ home countries have greater reliance on hydroelectric sources in electricity generation, more important agricultural and food industries, and active stances concerning climate change. Overall, our findings suggest noteworthy implications of climate risk on the financial markets via analyst forecast accuracy.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"75 ","pages":"Article 101345"},"PeriodicalIF":6.1,"publicationDate":"2024-10-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142571497","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-10-19DOI: 10.1016/j.jfs.2024.101340
Shivani Narayan , Dilip Kumar
Using a panel of 496 banks from the G20 nations, the study assesses the role of macroprudential policies in reducing systemic risk. The study further assesses the utility of these policies in conjunction with monetary policy instruments and bank and country-specific characteristics and finds the significant impact of macroprudential policies in curbing systemic risk and promoting economic stability. The study finds this relationship to hold regardless of economic conditions like inflationary pressure and financial distress. The result highlights that easing macroprudential policies during financial distress can help banks cope with systemic losses. We split the macroprudential policies into policies targeting the demand and supply of loans and find complementarity among the policies to reduce systemic risk. Our results demonstrate the heterogenous effect of macroprudential policies in limiting systemic risk, with the effect varying with bank size, leverage, liquidity, and concentration of loans. Finally, we find a moderating role of these policies in limiting the impact of uncertainties on systemic risk.
{"title":"Macroprudential policy and systemic risk in G20 nations","authors":"Shivani Narayan , Dilip Kumar","doi":"10.1016/j.jfs.2024.101340","DOIUrl":"10.1016/j.jfs.2024.101340","url":null,"abstract":"<div><div>Using a panel of 496 banks from the G20 nations, the study assesses the role of macroprudential policies in reducing systemic risk. The study further assesses the utility of these policies in conjunction with monetary policy instruments and bank and country-specific characteristics and finds the significant impact of macroprudential policies in curbing systemic risk and promoting economic stability. The study finds this relationship to hold regardless of economic conditions like inflationary pressure and financial distress. The result highlights that easing macroprudential policies during financial distress can help banks cope with systemic losses. We split the macroprudential policies into policies targeting the demand and supply of loans and find complementarity among the policies to reduce systemic risk. Our results demonstrate the heterogenous effect of macroprudential policies in limiting systemic risk, with the effect varying with bank size, leverage, liquidity, and concentration of loans. Finally, we find a moderating role of these policies in limiting the impact of uncertainties on systemic risk.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"75 ","pages":"Article 101340"},"PeriodicalIF":6.1,"publicationDate":"2024-10-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142538699","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-10-18DOI: 10.1016/j.jfs.2024.101336
Zlata Tabachová , Christian Diem , András Borsos , Csaba Burger , Stefan Thurner
Realistic credit risk assessment, the estimation of losses due to a debtors failure, is central for maintaining financial stability. Credit risk models focus on the financial conditions of borrowers and only marginally consider other risks from the real economy, supply chains in particular. Recent pandemics, geopolitical instabilities, and natural disasters demonstrated that supply chain shocks can contribute to financial losses large enough to threaten financial stability. Based on a unique nation-wide micro-dataset, containing practically all supply chain relations of all Hungarian firms, together with their bank loans, we develop a multi-layer shock propagation framework to estimate how economic shocks to firms cascade in the supply chain network (SCN), leading to additional financial losses to firms, additional defaults of loans and, hence, losses to banks’ equity buffers. First, we estimate the financial systemic risk of individual firms, by quantifying the expected financial losses caused by a firm’s own- and all the secondary defaulting loans caused by supply chain network contagion. We find a small fraction of firms carrying substantial financial systemic risk, affecting up to 22% of the banking system’s overall equity (assuming a loss given default of 100%). These losses are predominantly caused by SCN-contagion. Second, we calculate for every bank the expected loss (EL), value at risk (VaR) and expected shortfall (ES), with and without SCN-contagion. We find that SCN-contagion amplifies EL, VaR, and ES by a factor of 5.2, 6.7 and 4.4, respectively. Third, we showcase how the new framework can be used to assess the risks of a large real economy shock for financial stability. We simulate the financial losses from a COVID-19 inspired shock calibrated from firm-level employment data in the beginning of 2020. Our simulations show that without any interventions, system-wide bank equity would suffer losses of 6%. The framework can be used to design and test targeted policy interventions, e.g., optimally providing firms with enough liquidity-support to avert their default. By supporting selected illiquid (yet solvent) firms with additional liquidity totalling 0.5% of overall bank equity, the losses can be reduced from 6% to 1% of overall bank equity. These findings indicate that for a more complete picture of financial stability and realistic credit risk assessment, SCN contagion needs to be considered. This now quantifiable contagion channel is of relevance for future systemic risk assessments of regulators.
{"title":"Estimating the impact of supply chain network contagion on financial stability","authors":"Zlata Tabachová , Christian Diem , András Borsos , Csaba Burger , Stefan Thurner","doi":"10.1016/j.jfs.2024.101336","DOIUrl":"10.1016/j.jfs.2024.101336","url":null,"abstract":"<div><div>Realistic credit risk assessment, the estimation of losses due to a debtors failure, is central for maintaining financial stability. Credit risk models focus on the financial conditions of borrowers and only marginally consider other risks from the real economy, supply chains in particular. Recent pandemics, geopolitical instabilities, and natural disasters demonstrated that supply chain shocks can contribute to financial losses large enough to threaten financial stability. Based on a unique nation-wide micro-dataset, containing practically all supply chain relations of all Hungarian firms, together with their bank loans, we develop a multi-layer shock propagation framework to estimate how economic shocks to firms cascade in the supply chain network (SCN), leading to additional financial losses to firms, additional defaults of loans and, hence, losses to banks’ equity buffers. First, we estimate the financial systemic risk of individual firms, by quantifying the expected financial losses caused by a firm’s own- and all the secondary defaulting loans caused by supply chain network contagion. We find a small fraction of firms carrying substantial financial systemic risk, affecting up to 22% of the banking system’s overall equity (assuming a loss given default of 100%). These losses are predominantly caused by SCN-contagion. Second, we calculate for every bank the expected loss (EL), value at risk (VaR) and expected shortfall (ES), with and without SCN-contagion. We find that SCN-contagion amplifies EL, VaR, and ES by a factor of 5.2, 6.7 and 4.4, respectively. Third, we showcase how the new framework can be used to assess the risks of a large real economy shock for financial stability. We simulate the financial losses from a COVID-19 inspired shock calibrated from firm-level employment data in the beginning of 2020. Our simulations show that without any interventions, system-wide bank equity would suffer losses of 6%. The framework can be used to design and test targeted policy interventions, e.g., optimally providing firms with enough liquidity-support to avert their default. By supporting <em>selected</em> illiquid (yet solvent) firms with additional liquidity totalling 0.5% of overall bank equity, the losses can be reduced from 6% to 1% of overall bank equity. These findings indicate that for a more complete picture of financial stability and realistic credit risk assessment, SCN contagion needs to be considered. This now quantifiable contagion channel is of relevance for future systemic risk assessments of regulators.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"75 ","pages":"Article 101336"},"PeriodicalIF":6.1,"publicationDate":"2024-10-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142656829","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-10-18DOI: 10.1016/j.jfs.2024.101339
Robert F. Engle , Tina Emambakhsh , Simone Manganelli , Laura Parisi , Riccardo Pizzeghello
SRISK is a measure of a firms' systemic risk contribution that is computed using its listed stock market price. SRISK measurement is extended and applied to firms that do not have listed equity. A mapping from balance sheet characteristics to SRISK for listed firms is applied to SRISK for unlisted European banks. The mapping is validated by comparing SRISK measures for unlisted banks with their losses in European bank stress-testing.
{"title":"Estimating systemic risk for non-listed Euro-area banks","authors":"Robert F. Engle , Tina Emambakhsh , Simone Manganelli , Laura Parisi , Riccardo Pizzeghello","doi":"10.1016/j.jfs.2024.101339","DOIUrl":"10.1016/j.jfs.2024.101339","url":null,"abstract":"<div><div>SRISK is a measure of a firms' systemic risk contribution that is computed using its listed stock market price. SRISK measurement is extended and applied to firms that do not have listed equity. A mapping from balance sheet characteristics to SRISK for listed firms is applied to SRISK for unlisted European banks. The mapping is validated by comparing SRISK measures for unlisted banks with their losses in European bank stress-testing.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"75 ","pages":"Article 101339"},"PeriodicalIF":6.1,"publicationDate":"2024-10-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142586172","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-10-17DOI: 10.1016/j.jfs.2024.101337
Falko Fecht , Stefan Reitz , Patrick Weber
In this study, we examine the trading book of a major dealer in the European unsecured money market, focusing on the impact of a dealer’s own funding liquidity risk on the pricing of his interbank trades pre- and post- the 2007/08 financial crisis. Our analysis reveals two key insights: First, utilizing a panel model, we observe that heightened funding liquidity risks for the dealer generally affect his quoted prices for interbank liquidity. Second, while in tranquil periods this effect is statistically significant but economically less pronounced, the collapse of Lehman Brothers led to a strong liquidity pricing effect: a one standard deviation increase in the funding liquidity risk of the dealer translated to a 11 basis points higher mid-price for overnight liquidity. We thus find evidence that funding liquidity risks exacerbated the overall contraction of money market liquidity during this period.
{"title":"A dealer’s funding liquidity risk and its money market trades in the 2007/08 crisis","authors":"Falko Fecht , Stefan Reitz , Patrick Weber","doi":"10.1016/j.jfs.2024.101337","DOIUrl":"10.1016/j.jfs.2024.101337","url":null,"abstract":"<div><div>In this study, we examine the trading book of a major dealer in the European unsecured money market, focusing on the impact of a dealer’s own funding liquidity risk on the pricing of his interbank trades pre- and post- the 2007/08 financial crisis. Our analysis reveals two key insights: First, utilizing a panel model, we observe that heightened funding liquidity risks for the dealer generally affect his quoted prices for interbank liquidity. Second, while in tranquil periods this effect is statistically significant but economically less pronounced, the collapse of Lehman Brothers led to a strong liquidity pricing effect: a one standard deviation increase in the funding liquidity risk of the dealer translated to a 11 basis points higher mid-price for overnight liquidity. We thus find evidence that funding liquidity risks exacerbated the overall contraction of money market liquidity during this period.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"75 ","pages":"Article 101337"},"PeriodicalIF":6.1,"publicationDate":"2024-10-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142531949","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-10-15DOI: 10.1016/j.jfs.2024.101338
Pejman Abedifar , Morteza Abdollahzadeh , Amine Tarazi , Lawrence J. White
This paper investigates the pricing of insolvent banks in the U.S. that are sold under the purchase and assumption resolution method of the Federal Deposit Insurance Corporation (FDIC). We consider quarterly data for 444 acquisitions of insolvent U.S. banks between 2009 and 2016. We find that acquirers not only pay higher prices for insolvent banks with larger core deposits, as has been highlighted by the literature (and is consistent with the FDIC’s beliefs), but also for those banks with larger branch networks that are less dispersed geographically. When the acquirers bid (separately) for the assets of the insolvent banks, they place a positive value on the number of branches of the insolvent bank, but appear to be insensitive to geographic dispersion. Acquirers also pay more for banks with a national charter. The results additionally show that failed banks are most likely to be acquired by relatively large and highly capitalized banks whose organic growth is not affected in the years following the acquisition. Overall, our findings contribute to a better understanding of the implications of the purchase and assumption resolution method for the FDIC and for the banking industry.
{"title":"The sale of failed banks: The importance of their branch networks and of the acquirers’ financial strength","authors":"Pejman Abedifar , Morteza Abdollahzadeh , Amine Tarazi , Lawrence J. White","doi":"10.1016/j.jfs.2024.101338","DOIUrl":"10.1016/j.jfs.2024.101338","url":null,"abstract":"<div><div>This paper investigates the pricing of insolvent banks in the U.S. that are sold under the <em>purchase and assumption</em> resolution method of the Federal Deposit Insurance Corporation (FDIC). We consider quarterly data for 444 acquisitions of insolvent U.S. banks between 2009 and 2016. We find that acquirers not only pay higher prices for insolvent banks with larger core deposits, as has been highlighted by the literature (and is consistent with the FDIC’s beliefs), but also for those banks with larger branch networks that are less dispersed geographically. When the acquirers bid (separately) for the assets of the insolvent banks, they place a positive value on the number of branches of the insolvent bank, but appear to be insensitive to geographic dispersion. Acquirers also pay more for banks with a national charter. The results additionally show that failed banks are most likely to be acquired by relatively large and highly capitalized banks whose organic growth is not affected in the years following the acquisition. Overall, our findings contribute to a better understanding of the implications of the <em>purchase and assumption</em> resolution method for the FDIC and for the banking industry.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"75 ","pages":"Article 101338"},"PeriodicalIF":6.1,"publicationDate":"2024-10-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142531948","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
While government led bank capital infusions in US and other developed markets have been usually contingent an external shock or crisis episode, India presents a unique setting where significant capital infusions happen annually to stabilize the weak balance sheets of undercapitalized government owned public sector banks. Such “repeated” capital infusions can either better engender financial stability, given the timely government interventions; or create instability arising from possible moral hazard concerns. "Do such repeated government capital infusions lower banks’ financial risks and improve financial stability?” We shed light on the question through the lens of capital infusions in the Indian market. Based on the exhaustive sample of government capital infusions into public sector banks for the period 2008–18, we find robust evidence that capital infusions are associated with economically significant higher default, capital shortfall and network risks post-infusion, signaling a moral hazard problem, where treated banks may assume more risky investments.
{"title":"Do repeated government infusions help financial stability? Evidence from an emerging market","authors":"Madhu Kalimipalli , Olaleye Morohunfolu , Shankar Ramachandran","doi":"10.1016/j.jfs.2024.101334","DOIUrl":"10.1016/j.jfs.2024.101334","url":null,"abstract":"<div><div>While government led bank capital infusions in US and other developed markets have been usually contingent an external shock or crisis episode, India presents a unique setting where significant capital infusions happen annually to stabilize the weak balance sheets of undercapitalized government owned public sector banks. Such <em>“repeated”</em> capital infusions can either better engender financial stability, given the timely government interventions; or create instability arising from possible moral hazard concerns. \"<em>Do such repeated government capital infusions lower banks’ financial risks and improve financial stability?</em>” We shed light on the question through the lens of capital infusions in the Indian market. Based on the exhaustive sample of government capital infusions into public sector banks for the period 2008–18, we find robust evidence that capital infusions are associated with economically significant higher default, capital shortfall and network risks post-infusion, signaling a moral hazard problem, where treated banks may assume more risky investments.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"75 ","pages":"Article 101334"},"PeriodicalIF":6.1,"publicationDate":"2024-10-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142531947","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-09-24DOI: 10.1016/j.jfs.2024.101335
Cheng Zhou
This paper investigates the crucial role of capital controls in maintaining macroeconomic stability in China. We develop an open macroeconomic model integrating capital controls within a managed floating exchange rate system. Our model shows that capital controls enhance the effectiveness of foreign exchange interventions by restricting capital outflows and providing a broader array of policy options, though they may also create discrepancies between domestic and foreign asset holdings. Simulations using quarterly time-series data reveal that capital controls are essential for the success of both sterilized and non-sterilized interventions. These results indicate that the combined use of capital controls and foreign exchange interventions can reduce macroeconomic volatility in China. Moreover, our analysis of fixed versus floating exchange rate regimes suggests that an inappropriate regime choice can increase volatility in capital flows. Therefore, China should adopt a balanced financial approach within its managed floating system to stabilize the macroeconomy.
{"title":"Capital controls in China: A necessity for macroeconomic stability","authors":"Cheng Zhou","doi":"10.1016/j.jfs.2024.101335","DOIUrl":"10.1016/j.jfs.2024.101335","url":null,"abstract":"<div><div>This paper investigates the crucial role of capital controls in maintaining macroeconomic stability in China. We develop an open macroeconomic model integrating capital controls within a managed floating exchange rate system. Our model shows that capital controls enhance the effectiveness of foreign exchange interventions by restricting capital outflows and providing a broader array of policy options, though they may also create discrepancies between domestic and foreign asset holdings. Simulations using quarterly time-series data reveal that capital controls are essential for the success of both sterilized and non-sterilized interventions. These results indicate that the combined use of capital controls and foreign exchange interventions can reduce macroeconomic volatility in China. Moreover, our analysis of fixed versus floating exchange rate regimes suggests that an inappropriate regime choice can increase volatility in capital flows. Therefore, China should adopt a balanced financial approach within its managed floating system to stabilize the macroeconomy.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"75 ","pages":"Article 101335"},"PeriodicalIF":6.1,"publicationDate":"2024-09-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142357136","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-09-14DOI: 10.1016/j.jfs.2024.101324
Abu Amin , Sabur Mollah , Syed Kamal , Yang Zhao , Rasim Simsek
This study examines the role of independent directors’ network centrality in bank risk-taking. Following the shareholder-incentive hypothesis and social-network theory, we predict and find that independent directors’ connectedness is positively associated with bank risk-taking. The results hold after a battery of robustness checks and endogeneity tests. Furthermore, consistent with the influence channel of networks, we show that connectedness empowers independent directors, whereas influential independent directors facilitate aggressive investment. We also find that the risk-taking effects are more pronounced for complex banks and banks with higher equity capital, higher income diversity, and lower cost-efficiency.
{"title":"Independent directors’ connectedness and bank risk-taking","authors":"Abu Amin , Sabur Mollah , Syed Kamal , Yang Zhao , Rasim Simsek","doi":"10.1016/j.jfs.2024.101324","DOIUrl":"10.1016/j.jfs.2024.101324","url":null,"abstract":"<div><p>This study examines the role of independent directors’ network centrality in bank risk-taking. Following the shareholder-incentive hypothesis and social-network theory, we predict and find that independent directors’ connectedness is positively associated with bank risk-taking. The results hold after a battery of robustness checks and endogeneity tests. Furthermore, consistent with the influence channel of networks, we show that connectedness empowers independent directors, whereas influential independent directors facilitate aggressive investment. We also find that the risk-taking effects are more pronounced for complex banks and banks with higher equity capital, higher income diversity, and lower cost-efficiency.</p></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"75 ","pages":"Article 101324"},"PeriodicalIF":6.1,"publicationDate":"2024-09-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S1572308924001098/pdfft?md5=74e86273ebeb5134515a982658a3114a&pid=1-s2.0-S1572308924001098-main.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142272226","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-08-28DOI: 10.1016/j.jfs.2024.101323
Maria Semenova , Vladimir Sokolov , Alexander Benov
This paper examines the influence of media freedom restrictions on retail depositor behavior during banking crises. Non-professional, retail depositors are particularly affected due to insufficient access to vital information about the banking industry's vulnerability and broad macroeconomic conditions amidst the crisis. Using data from 85 countries from 2004 to 2019, we found that during crises, higher media restrictions lead to an increase in the rate of household deposit withdrawals. If media restrictions hinder depositors from accurately assessing the banking sector’s exposure, there is a higher likelihood of panic-based response in uncertain times brought on by the banking crisis, potentially triggering bank runs. Furthermore, our results reveal that lower banking sector risk can mitigate the negative effect of media restrictions on retail deposit growth during a banking crisis, especially in middle-income OECD and non-OECD countries, countries with stronger institutional environments, and countries with higher financial literacy. As a policy suggestion, promoting financial literacy could help reduce information asymmetry and prevent panic withdrawals, even in environments with significant media restrictions.
{"title":"Bank runs and media freedom: What you don’t know won’t hurt you?","authors":"Maria Semenova , Vladimir Sokolov , Alexander Benov","doi":"10.1016/j.jfs.2024.101323","DOIUrl":"10.1016/j.jfs.2024.101323","url":null,"abstract":"<div><p>This paper examines the influence of media freedom restrictions on retail depositor behavior during banking crises. Non-professional, retail depositors are particularly affected due to insufficient access to vital information about the banking industry's vulnerability and broad macroeconomic conditions amidst the crisis. Using data from 85 countries from 2004 to 2019, we found that during crises, higher media restrictions lead to an increase in the rate of household deposit withdrawals. If media restrictions hinder depositors from accurately assessing the banking sector’s exposure, there is a higher likelihood of panic-based response in uncertain times brought on by the banking crisis, potentially triggering bank runs. Furthermore, our results reveal that lower banking sector risk can mitigate the negative effect of media restrictions on retail deposit growth during a banking crisis, especially in middle-income OECD and non-OECD countries, countries with stronger institutional environments, and countries with higher financial literacy. As a policy suggestion, promoting financial literacy could help reduce information asymmetry and prevent panic withdrawals, even in environments with significant media restrictions.</p></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"74 ","pages":"Article 101323"},"PeriodicalIF":6.1,"publicationDate":"2024-08-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142122153","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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