شفافیت سیستم بانکداری و بهره وری بانک اطلاعات مبتنی بر اجرا
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|18265||2006||25 صفحه PDF||سفارش دهید||محاسبه نشده|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Financial Intermediation, Volume 15, Issue 3, July 2006, Pages 307–331
In this paper, we investigate the relationship between the transparency of banks and the fragility of the banking system. We show that information-based bank runs may be inefficient because the deposit contract designed to provide liquidity induces depositors to have excessive incentives to withdraw. An improvement in the transparency of a bank may reduce depositor welfare by increasing the chance of an inefficient contagious run on other banks. A deposit insurance system in which some depositors are fully insured and the others are partially insured can ameliorate this inefficiency. Under such a system, bank runs can serve as an efficient mechanism for disciplining banks. We also consider bank managers' control over the timing of information disclosure, and find that bank managers may use their influence to eliminate both inefficient and efficient bank runs.
Imposing market discipline to alleviate the banks' moral hazard problems has become an important part of bank regulations around the world. In the new Basel Capital Accord, market discipline is recognized as one of the three “pillars” of the new regulation framework. As stated in a consultative document of the Basel Committee, “… market discipline has the potential to reinforce capital regulation and other supervisory efforts to promote safety and soundness in banks and financial systems. Market discipline imposes strong incentives on banks to conduct their business in a safe, sound, and efficient manner.”1 Although market discipline has the benefit of reducing the banks' incentive problems, it may increase the fragility of the banking system. To implement market discipline, banks must become transparent so that market participants have precise information about banks. However, as depositors learn more about their banks, they may react to adverse information and start bank runs more frequently. As suggested by Diamond and Dybvig (1983), Chari and Jagannathan (1988), and Chen (1999), bank runs may be inefficient and could reduce depositor welfare. If improvements in the transparency of banks lead to inefficient bank runs,2 then the welfare losses caused by this effect should be taken into account when regulators consider whether to impose more market discipline in the banking industry. The purpose of this paper is to investigate the relationship between the transparency of banks and the efficiency of bank runs. Specifically, we ask the following questions. (1) Is it possible that, by increasing the likelihood of an inefficient bank run, an improvement in the transparency of the banking system could reduce depositor welfare? (2) If the answer to question (1) is yes, is there anything that regulators can do to mitigate this problem? (3) How will bank managers who dislike bank runs use their influence on the banks' information disclosure decisions to affect the efficiency of bank runs? To answer these questions, we build a simple model with two banks and atomistic depositors. In this model, the banks' returns are positively correlated, and interim information about them will be revealed. Depositors decide whether to withdraw early according to their liquidity needs and the information they have about banks. As in Diamond and Dybvig (1983) and Chen (1999), in our model the deposit contract is designed to provide liquidity, so the amount received by an early withdrawing depositor is larger than the liquidation value of her deposits. This arrangement induces depositors to have excessive incentives to withdraw early. Under this setting, bank runs can serve as a disciplining mechanism for liquidating poor banks, but may happen too frequently because of the depositors' excessive incentives to withdraw. Also, since the banks' returns are positively correlated, contagious runs can occur. That is, depositors of a bank may start a bank run when they learn adverse information about the other bank. Based on the above model, we obtain the following results: (1) By increasing the chance of an inefficient contagious run, an improvement in the transparency of banks may reduce depositor welfare. (2) There is a deposit insurance system that can eliminate inefficient bank runs. Under this deposit insurance system, some depositors are fully insured and the remaining ones are partially insured. When this system is imposed, improvements in bank transparency always increase depositor welfare. (3) If we assume that bank managers (who dislike bank runs) can control the timing of information disclosure, then contagious runs will disappear. However, efficient bank runs may also be eliminated. The above results can be explained as follows. Consider the first result. An improvement in the transparency of the banking system has two effects on depositors' incentives to respond to information about the other bank. On the one hand, as information about their own bank becomes more precise, depositors become more patient and are less likely to respond to information about the other bank. On the other hand, as information about the other bank becomes more precise, depositors have a stronger incentive to respond to it because it contains more information about their own bank. We show that, if the correlation between the banks' returns is high and information about banks is relatively precise, the second effect will dominate, so an improvement in transparency will lead to a higher chance of a contagious run and a reduction in depositor welfare. As for our second result, the purpose of fully insuring some depositors is to reduce the number of depositors who will rush to the bank when a bank run occurs, and the purpose of partially insuring the others is to induce them to have the right incentive to withdraw. Under this system, bank runs can be an efficient mechanism for enforcing market discipline. This result suggests that, when regulators require banks to reveal more information, they should also adopt mechanisms that can induce depositors to use information efficiently. The first two results are derived under the assumptions that information arrives sequentially and that bank managers have no control over the timing of information disclosure. To reflect the bank managers' influence on information disclosure, we modify the model by assuming that the timing of information disclosure is controlled by bank managers who dislike bank runs. Under this assumption, contagious runs disappear because bank managers can avoid them by simultaneously revealing the information. However, if the prospects of the banking industry are so favorable that no bank run will occur when no new bank-specific information is revealed, bank mangers may delay the timing of information disclosure so that depositors cannot base their withdrawing decisions on any new information. When this happens, efficient runs are also eliminated and depositors may become worse off. This result provides a rationale for regulators to impose mandatory information disclosure requirements in the banking industry. In the banking literature, Cordella and Yeyati (1998) show that full transparency of bank risks may increase the chance of a bank failure through raising the deposit interest rate that banks have to pay in the riskier state. Hyytinen and Takalo (2002) propose that the costs of information disclosure will reduce the banks' franchise values, thus increase their risk-taking incentives. Complementing to these papers, our paper suggests another channel through which information transparency can affect banking fragility. In terms of the disciplining function of bank runs, our paper is related to Calomiris and Kahn (1991). Calomiris and Kahn show that, if depositors do not have liquidity needs, then lack of deposit insurance can result in bank runs that effectively discipline bank managers. As mentioned earlier, in our model the deposit contract is designed to provide liquidity, so depositors will have excessive incentives to withdraw when there is no deposit insurance. As a result, an adequately designed deposit insurance scheme is needed to induce efficient bank runs. The model and the deposit insurance system in our paper are similar to those in Chen (1999). There are two differences between the two papers. First, Chen (1999) assumes that the informed depositors receive perfect information about bank returns, so his model cannot be used to study the impact of information transparency on the stability of the banking system. Second, in the deposit insurance system proposed by Chen (1999), depositors are either fully insured or not insured at all. By contrast, in our paper depositors are either fully insured or partially insured. As will be shown, when information about banks is imperfect, partial deposit insurance can induce depositors to have the right incentive to withdraw. Our paper is also related to articles in the information disclosure literature.3Admati and Pfleiderer (2000) show that, when the firms' returns are positively correlated, information disclosure by one firm can generate positive spillover effects because investors can use this information to evaluate other firms. In our model, information disclosure by a bank also has spillover effects. However, depending on whether the revealed information will trigger a contagious run, the spillover effects may be either positive or negative. Boot and Thakor (2001) propose that agency problems provide a justification for disclosure regulations.4 Similar to their idea, we demonstrate that the reluctance of bank managers to reveal information can justify mandatory disclosure requirements in the banking industry. The rest of the paper is organized as follows. Section 2 describes the basic model. Section 3 analyzes the model and shows that an improvement in transparency may increase the chance of a contagious run. Section 4 demonstrates that inefficient bank runs can be eliminated by deposit insurance. The case where bank managers can control the timing of information disclosure is investigated in Section 5. Section 6 contains concluding remarks.
نتیجه گیری انگلیسی
In this paper, we show that improvements in the transparency of the banking system may increase the chance of a contagious bank run. We also discuss the possibility of using deposit insurance to improve the efficiency of bank runs. In addition, we illustrate how our results will change when bank managers can control the timing of information disclosure. Our paper has empirical implications. It implies that fundamentally weaker banks are more likely to suffer runs. It also predicts that contagious runs are more likely to occur when the correlation between banks' returns is higher. In addition, it provides an explanation for why suspension of convertibility can reduce the probability of a bank closure. There are several directions to extend our paper. First, the information structure of our model can be enriched so that more subtle issues about information disclosure can be discussed. In our model, an improvement in transparency refers to an increase in the precision of the public signals. There exist other definitions for improvements in transparency. One alternative is that the transparency of the banking system improves when depositors know better whether the problems of the failed banks are systematic in nature or idiosyncratic in nature. If we define improvements in transparency in this way, an improvement in transparency may always reduce the chance of a contagious run.30 This extension will have policy implications on how to construct the optimal disclosure rules for financial institutions. Second, this paper investigates how to use deposit insurance to eliminate inefficient bank runs. Our model can be extended to study the relationship between other bank regulation policies and the efficiency of bank runs. For example, bank capital regulations can affect the depositors' withdrawing behavior in several ways. As the bank capital requirements become more risk sensitive, depositors will have more precise information about banks. But if bank capital regulations are accompanied by more prompt corrective actions, bank regulators will play a more important role in disciplining banks, so depositors may need to worry less about the soundness of banks. This will reduce the depositors' incentives to acquire information. It will be interesting to study how different bank regulations affect the efficiency of bank runs. Finally, to focus on how depositors respond to information, in this paper we assume that bank risk is exogenously determined. In the real world, bank managers have great influence on the choice of bank risk. In the banking literature, many papers discuss how to design regulation policies to reduce the bank managers' incentives to pursue unsound risks.31 If we assume that bank risk is chosen by bank managers, our model will have implications on how the transparency of banks affects the bank managers' risk-taking behaviors.