Does Media Sentiment Influence Bank Supervision?

This paper explores the impact of media sentiment on bank supervision, focusing on the supervisory ratings of bank holding companies assigned by the Federal Reserve System. We uncover a significant impact of media sentiment on supervisory ratings by employing a robust instrumented differences-in-differences strategy. We show that the effect is predominantly driven by negative media articles, suggesting an inherent negativity bias. The effect is moderated by examiner experience and exam duration.

Keywords: Media Sentiment, Bank Holding Companies (BHCs), Bank Supervision, Supervisory Ratings, Financial News, Natural Language Processing (NLP)

JEL Classification: G18, G21, G28, G32

Suggested Citation: Suggested Citation

Aldama-Navarrete, David and Curti, Filippo and Hansen, Anne Lundgaard and Kazinnik, Sophia, Does Media Sentiment Influence Bank Supervision? (April 5, 2024). Available at SSRN: https://ssrn.com/abstract=4785921 or http://dx.doi.org/10.2139/ssrn.4785921