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Managerial Beliefs and Banking Behavior

Author

Listed:
  • Damiano B. Silipo

    (Università della Calabria (Italy))

  • Giovanni Verga

    (Università di Parma (Italy))

  • Sviatlana Hlebik

    (Crédit Agricole Cariparma (Italy))

Abstract

We use a large sample of US banks to construct a new indicator of managerial beliefs based on bank provisioning. This indicator does not only anticipate a future charge-off but also explains future loan growth and other variables. In particular, the indicator shows that an increase in managerial optimism (pessimism) leads to expanded (tight) lending, leverage, and a riskier (less risky) portfolio. Our findings confirm that widespread managerial optimism (pessimism) prevailed before (during) the 2007-2008 financial crisis and that changes in managerial beliefs played an important role in the lending and leverage cycles.

Suggested Citation

  • Damiano B. Silipo & Giovanni Verga & Sviatlana Hlebik, 2023. "Managerial Beliefs and Banking Behavior," Journal of Financial Services Research, Springer;Western Finance Association, vol. 64(3), pages 401-431, December.
    • Handle: RePEc:kap:jfsres:v:64:y:2023:i:3:d:10.1007_s10693-023-00407-5
    DOI: 10.1007/s10693-023-00407-5
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    More about this item

    Keywords

    Managerial optimism and pessimism; Banking behavior; Bank’s risk; 2007-2008 financial crisis/crash;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

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