Managerial Macroeconomic Perception and Systemic Risk in China
71 Pages Posted: 14 Mar 2024
Date Written: December 30, 2023
Abstract
This paper constructs a managerial macroeconomic perception index based on the textual financial disclosures and examines its impact on systemic risk in China. We reveal a significant positive relationship between managerial macroeconomic perception, particularly the forward-looking managerial macroeconomic perception, and bank systemic risk. Our study show that managers with optimistic perception about macroeconomic conditions tend to engage in excessive risk-taking activities and increase the risk contagion among banks. Heterogeneous analyses suggest that the positive relationship between manager macroeconomic perception and systemic risk are more pronounced among banks that are non-state-owned, exclusively listed in A-shares, highly leveraged, or not considered systemically important. We also show that macroeconomic policy environment can mitigate the negative impact of managerial macroeconomic perception on systemic risk. These findings highlight the substantial role that managerial macroeconomic perception plays in shaping systemic risk within the banking sector.
Keywords: Managerial Macroeconomic Perception; Systemic Risk; Textual Analysis; Risk-taking
JEL Classification: D80; G21; G30
Suggested Citation: Suggested Citation