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Mandatory disclosure tone and bank risk-taking: Evidence from Europe

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  • Del Gaudio, Belinda L.
  • Megaravalli, Amith V.
  • Sampagnaro, Gabriele
  • Verdoliva, Vincenzo

Abstract

We examine the relationship between the tone of mandatory disclosures and bank risk insolvency to determine what this qualitative information may reveal about bank stability. By using text analysis and the context-specific text dictionaries of Loughran and McDonald, we find that qualitative information collected in a negative tone helps explain bank risk insolvency. This finding suggests that qualitative information through the mandatory disclosure tone could be used to detect the communication among banks, the market and supervisors.

Suggested Citation

  • Del Gaudio, Belinda L. & Megaravalli, Amith V. & Sampagnaro, Gabriele & Verdoliva, Vincenzo, 2020. "Mandatory disclosure tone and bank risk-taking: Evidence from Europe," Economics Letters, Elsevier, vol. 186(C).
    • Handle: RePEc:eee:ecolet:v:186:y:2020:i:c:s0165176519302538
    DOI: 10.1016/j.econlet.2019.108531
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    8. Toan Luu Duc Huynh, 2023. "When Elon Musk Changes his Tone, Does Bitcoin Adjust Its Tune?," Computational Economics, Springer;Society for Computational Economics, vol. 62(2), pages 639-661, August.
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    More about this item

    Keywords

    Text analysis; Bank stability; Mandatory disclosure; Tone;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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