Bank Management Sentiment and Liquidity Hoarding

58 Pages Posted: 22 May 2020 Last revised: 1 Jul 2022

See all articles by Allen N. Berger

Allen N. Berger

University of South Carolina - Darla Moore School of Business

Hugh Hoikwang Kim

University of South Carolina, Darla Moore School of Business

Xiaonan (Flora) Ma

University of South Carolina, Darla Moore School of Business, Department of Finance, Students

Date Written: April 27, 2020

Abstract

We analyze how bank managers’ sentiment affects bank liquidity hoarding, distinguishing unexplained beliefs (“sentiment”) from fundamental-based beliefs (“tone”). We employ a novel managerial sentiment measure from textual analysis of 10-Ks and utilize a comprehensive research-based bank liquidity hoarding measure. We find negative bank management sentiment results in additional liquidity hoarding not warranted by fundamental bank conditions or external circumstances, with real economy and financial system implications. Further analysis confirms that our findings reflect bank volition rather than being driven only by bank customers. We address endogeneity using exogenous weather conditions as instruments and draw potential policy implications.

Keywords: bank sentiment, liquidity hoarding, textual analysis, bank disclosure

JEL Classification: G21, G02, D03

Suggested Citation

Berger, Allen N. and Kim, Hugh Hoikwang and Ma, Xiaonan (Flora), Bank Management Sentiment and Liquidity Hoarding (April 27, 2020). Available at SSRN: https://ssrn.com/abstract=3586500 or http://dx.doi.org/10.2139/ssrn.3586500

Allen N. Berger

University of South Carolina - Darla Moore School of Business ( email )

1014 Greene St.
Columbia, SC 29208
United States
803-576-8440 (Phone)
803-777-6876 (Fax)

Hugh Hoikwang Kim (Contact Author)

University of South Carolina, Darla Moore School of Business ( email )

1014 Greene Street
Columbia, SC 29208
United States

Xiaonan (Flora) Ma

University of South Carolina, Darla Moore School of Business, Department of Finance, Students ( email )

1014 Greene Street
Columbia, SC 29208
United States

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