Do Actions Follow Words? How bank sentiment predicts credit growth

Pablo Pastory y Camarasa () and Martien Lamers

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: This paper constructs a forward-looking bank managerial sentiment index by using earnings call transcripts of US, Canadian, and European banks from 2001 to 2021. First, we validate this index through regressions showing its predictive power for positive stock returns and earnings forecast revisions. Second, we analyze whether managerial sentiment predicts bank credit growth. We find that a one standard deviation increase in the index of future sentiment leads to a 1.85% rise in credit growth over the next year. The results remain robust to various controls and competing explanations, including managers catering to analysts’ expectations and macroeconomic expectations.

JEL-codes: D83 G21 G30 G40 M1 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2023-08
New Economics Papers: this item is included in nep-ban, nep-cfn and nep-fdg
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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:23/1073

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