The incentives of large sophisticated creditors to run on a too big to fail financial institution

This paper studies the incentives of large, sophisticated creditors to withdraw funds during a run on a systemically important financial institution-specifically the famous run on Continental Illinois in 1984. Surprisingly, we find that creditors with relatively liquid balance sheets initially withdrew more than other creditors. As time went on, institutions with relative large exposures were more likely to withdraw, despite government support which included a broad guarantee of all creditors. These findings have important implications for the design of facilities to resolve systemically important institutions in the future. (C) 2019 Published by Elsevier B.V.