The impact of divergence in communication tone on investors’ willingness to invest in eurozone small- to medium-sized enterprises

Dimitris Anastasiou, Stelios Giannoulakis, Christos Kallandranis () and Styliani-Iris Krokida

Journal of Risk

Abstract: We examine whether differences in the tone of verbal communications by the central bankers of the European Central Bank and those of central banks in the euro area can impact investors’ willingness to invest in euro area small- to medium-sized enterprises. Our measure of diverging communication tone is constructed using textual analysis and defined as the distance between the tones of the speeches of the respective central bankers. We use confidential firm-level data to show that a greater divergence in the tone of communication decreases investors’ willingness to invest.

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