Bank Management Sentiment and Liquidity Hoarding

50 Pages Posted: 22 May 2020 Last revised: 9 Nov 2020

See all articles by Allen N. Berger

Allen N. Berger

University of South Carolina - Darla Moore School of Business; Wharton Financial Institutions Center; European Banking Center

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 management sentiment affects liquidity hoarding. Our newly-created sentiment measure derives bank manager sentiment from language in banks’ annual reports (10-Ks). We find banks with more negative management sentiment hoard liquidity beyond what is warranted by their own conditions and external circumstances faced. Our results also suggest that this tendency varies with bank characteristics and time periods. Further analysis implies that our findings incorporate bank volition at least to some degree, rather than being driven only by customers. Our findings are robust to using exogenous weather conditions to instrument for sentiment. We also discuss 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 )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States
803-576-8440 (Phone)
803-777-6876 (Fax)

Wharton Financial Institutions Center

Philadelphia, PA 19104-6367
United States

European Banking Center

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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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