Understanding bank runs: The importance of depositor-bank relationships and networks

Journal Article (Review;Journal)

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.

Full Text

Duke Authors

Cited Authors

  • Iyer, R; Puri, M

Published Date

  • June 1, 2012

Published In

Volume / Issue

  • 102 / 4

Start / End Page

  • 1414 - 1445

International Standard Serial Number (ISSN)

  • 0002-8282

Digital Object Identifier (DOI)

  • 10.1257/aer.102.4.1414

Citation Source

  • Scopus