Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/268245 
Year of Publication: 
2022
Series/Report no.: 
ZEW Discussion Papers No. 22-066
Publisher: 
ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung, Mannheim
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.
Subjects: 
sentiment
text data
extrapolation
loan growth
systemic risk
JEL: 
G00
G10
G21
G41
Document Type: 
Working Paper

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