Bank manager sentiment, loan growth and bank risk

Brückbauer, Frank ; Cézanne, Tibault

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URN: urn:nbn:de:bsz:180-madoc-640287
Document Type: Working paper
Year of publication: 2022
The title of a journal, publication series: ZEW Discussion Papers
Volume: 22-066
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: G00 , G10 , G21 , G41,
Keywords (English): sentiment , text data , extrapolation , loan growth , systemic risk
Abstract: We build a textual score measuring the tone of bank earnings press release documents. We use this measure to define bank manager sentiment as the variation in the textual tone score which is orthogonal to bank-specific and macroeconomic fundamentals. Using this definition of sentiment, we present evidence on how bank managers’ systematic overoptimism affects the amount of credit that they supply to the real sector. Our empirical evidence suggests that decisions on the volume of new loans partially depend on past realizations of economic fundamentals, implying that loan growth and contemporaneous economic fundamentals might be systematically disconnected. Furthermore, we show that over-optimism on the part of bank managers spills over to their equity investors, who seem to perceive banks with high bank manager sentiment as having a lower systemic risk.

Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.

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