Professor of Entrepreneurship
Ji-Yub (Jay) Kim
Associate Professor of Entrepreneurship and Family Enterprise
Diffusion ; Distrust ; Organizational Audiences ; Community Similarity ; Bank Panic; Corporate Governance; Auditing, Risk Control and Performance ;
Journal Article | American Sociological Review | 81 | April 2016
Ripples of Fear: The Diffusion of a Bank Panic
Community reactions against organizations can be driven by negative information being spread through a diffusion process, which is distinct from the diffusion of organizational practices.A classic example of selective diffusion of negative information is offered by bank panics, which involve widespread bank runs although a low proportion of banks experience a run. The authors develop theory on how organizational similarity, community similarity, and network proximity create selective diffusion paths specifically for resistance against organizations.Using data from the largest customer-driven bank panic in the U.S., the authors find strong effects of organizational and community similarity on the diffusion of bank runs. Runs on banks are more likely to diffuse across communities with similar ethnicity, national origin, religion, and wealth, and across banks that are structurally equivalent or have the same organizational form. We also find stronger influence from runs that are spatially proximate and in the same state.