Does Media Sentiment Influence Bank Supervision?

Authors

David Aldama-Navarrete, Filippo Curti, Anne Lundgaard Hansen, Sophia Kazinnik

February 18, 2025

FEDERAL RESERVE RESEARCH: Richmond

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.

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