The effects of social media use by bank depositors
Document Type
Article
Publication Title
Annals of Finance
Publication Date
9-1-2024
Abstract
A simple model is developed to analyze the effects of social media use by a bank’s uninsured depositors. While social media increases the likelihood of bank runs, it can be ex-ante beneficial to a bank by raising its shareholders’ equity. Social media enhances monitoring of a bank’s financial condition, thereby giving uninsured depositors a valuable option to withdraw early and avoid potential losses in states when a bank is likely to be insolvent. Recognizing this option, uninsured depositors require a lower promised interest rate that reduces the bank’s cost of funding at the expense of a greater liability for the bank’s deposit insurer.
Volume
20
Issue
3
First Page
289
Last Page
300
DOI
10.1007/s10436-024-00450-9
Recommended Citation
Ding, D., & Pennacchi, G. (2024). The effects of social media use by bank depositors. Annals of Finance, 20 (3), 289-300. https://doi.org/10.1007/s10436-024-00450-9
ISSN
16142446
E-ISSN
16142454
