Topic: Disclosure of Bank-specific Information and the Stability of Financial Systems

Speaker: Ming Yang, Associate Professor of Economics and Finance, University College London

Date: November 24, 2021 (Wednesday)

Time: 4:30pm-6:00pm

Location: 4-101

Language: English

 

Abstract:

We find that disclosing bank-specific information reallocates systemic risk, but whether it mitigates systemic bank runs depends on the information disclosed. Disclosure reveals banks’ resilience to adverse shocks, and shifts systemic risk from weak to strong banks. Yet, only disclosure of banks’ exposure to systemic risk can mitigate systemic bank runs because it shifts systemic risk from more vulnerable banks to those less vulnerable. Optimal disclosure thus maximally differentiates such exposure, provided that banks experience runs simultaneously, if inevitable. Disclosure of banks’ idiosyncratic factors does not differentiate such exposure, rendering the resulting reallocation of systemic risk ineffective in mitigating systemic runs. In the context of disclosing stress-test results, when the quality of the banking system deteriorates, the regulator may have to face a sudden run on a huge mass of banks rather than gradually abandoning weak banks.

About the Speaker:

Ming Yang is an Associate Professor of Economics and Finance at UCL. He works on various topics in finance, economics, and accounting, which share the central theme of strategic information acquisition and disclosure. In particular, He studies i) the interplay between security design and information acquisition in corporate finance, ii) the role of information acquisition and disclosure in supporting coordination, iii) incentive contract and monitoring, iv) accounting and optimal information disclosure, etc. His work includes papers published in the Review of Economic Studies, the Review of Financial Studies, Journal of Economic Theory, Theoretical Economics, and the Journal of Accounting and Economics.