Should regulators always be transparent? a bank run experiment

We study, using laboratory experiments, the extent to which disclosure policies about financial health of a bank affect likelihood run. consider two regimes, full and no disclosure, under scenarios: one in is on average financially solvent another insolvent. When insolvent, regime reduces expected runs. In contrast, when solvent, increases also find that disclosing identical information depositors’ expectations are low versus high (good bad news) leads behavioural differences only indirectly through their beliefs other depositor’s actions. Our findings show instituting policy greater banking transparency not always beneficial.