Social media was widely criticised for its role in the collapse of Silicon Valley bank in 2023. In this review, we summarise a paper that quantifies the role social media played in the turbulence faced by US regional banks. The authors argue that, given certain parameters being true, social media data can be used to forecast bank collapses and bank runs.     

LITERATURE

In this piece, we discuss the Universite Paris-Dauphine Research Paper titled Social Media as a Bank Run Catalyst by J. Anthony Cookson, Corbin Fox, Javier Gil-Bazo, Juan Imbet and Christoph Schiller.

This paper assesses social media’s role in the downfall of Silicon Valley Bank (SVB) and the distress of other regional banks in the US. The authors argue that the inherent nature of social media contributed to the run on SVB and amplified the distress for other regional banks. The authors conduct this analysis by quantifying sentiment around banks on Twitter (now X) and how social media sentiment affected individual bank balance sheets and stock prices.

QUICK VIEW

• The study collected data from Twitter’s API, focusing on tweets mentioning depository institutions between 1st January 2020 and 31st March 2023. The authors analyse the volume of tweets and the number of words in each tweet to generate raw sentiment scores.