Perceived vs Actual Financial Crisis and Bank Credit Standards: Is There Any Indication of Self-Fulfilling Prophecy?

34 Pages Posted: 27 Mar 2020

See all articles by Dimitrios Anastasiou

Dimitrios Anastasiou

Alpha Bank; Athens University of Economics and Business, School of Business, Department of Accounting and Finance

Zacharias Bragoudakis

Bank of Greece; National and Kapodistrian University of Athens, Department of Economics

Stylianos Giannoulakis

Athens University of Economics and Business - Department of Economics

Date Written: January 24, 2020

Abstract

We link senior banks loan officers’ responses regarding their decisions for bank credit standards, from successive surveys from the European Bank Lending Survey to investigate two important issues. First, we examine the relationship between bank credit standards (CS) and perceived and actual financial crisis. Second, we investigate whether the notion of the self-fulfilling prophecy is applicable in the case of the 2008 global financial crisis. In particular, the second main research question that we try to answer is whether the perceived crisis (as implied by the Google search query “financial crisis”) contributed to the acceleration of the outburst of the actual crisis. We find that both perceived and actual financial crisis affect senior bank loan officers’ credit standards, with the actual crisis to be the one with the greatest impact. These results are consistent both in the short and in the long run. Finally, by putting forward a binary choice model we find sufficient evidence to support the Self-Fulfilling Prophecy notion.

Keywords: Credit Standards; Financial Crisis; Google Trends; Crisis Sentiment; Self-Fulfilling Prophecy

JEL Classification: C51, E30, E32, E44, E51, G01, G21.

Suggested Citation

Anastasiou, Dimitrios and Bragoudakis, Zacharias and Giannoulakis, Stylianos, Perceived vs Actual Financial Crisis and Bank Credit Standards: Is There Any Indication of Self-Fulfilling Prophecy? (January 24, 2020). Available at SSRN: https://ssrn.com/abstract=3534563 or http://dx.doi.org/10.2139/ssrn.3534563

Dimitrios Anastasiou

Alpha Bank ( email )

Athens, 16561
Greece

Athens University of Economics and Business, School of Business, Department of Accounting and Finance ( email )

76 Patission Street
GR-104 34 Athens
Greece

Zacharias Bragoudakis (Contact Author)

Bank of Greece ( email )

21 E. Venizelos Avenue
GR 102 50 Athens
Greece
+302103203605 (Phone)

National and Kapodistrian University of Athens, Department of Economics ( email )

Sofocleous 1
Athens, 105 59
Greece
+30 21 0368 9400 (Phone)

HOME PAGE: http://www.econ.uoa.gr/

Stylianos Giannoulakis

Athens University of Economics and Business - Department of Economics ( email )

76 Patission Street
GR-10434 Athens
Greece

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