Managerial Sentiment and Corporate Liquidity Hoarding: Evidence from the Special Case of Banking

53 Pages Posted: 22 May 2020 Last revised: 21 Jul 2021

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 managerial sentiment embedded in accounting statements affects corporate liquidity hoarding. We choose banks as our empirical setting due to superior detailed accounting data, a comprehensive research-based liquidity hoarding measure, and avoidance of interindustry differences in liquidity needs. We derive managerial sentiment from negative and positive tones in annual reports (10-K) language. We find more negative managerial sentiment results in more liquidity hoarding, consistent with our hypothesis. Further analysis confirms that findings incorporate bank volition rather than being driven only by customers. We also address endogeneity using exogenous weather conditions as instruments. We finally derive 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), Managerial Sentiment and Corporate Liquidity Hoarding: Evidence from the Special Case of Banking (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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