Unlocking financial insights: decoding sentiment in annual reports to transform bank risk and performance metrics

Abstract

One of outstanding issues of Pillar 3 information disclosure is to increase the relatively low interest of stakeholders of commercial banks operating in the CEE region in Pillar 3 information. The aim of this paper is to investigate the relations between the sentiment expressed in different sections of annual reports and the performance and risk indicators, disclosed as part of the Pillar 3 disclosures, of a commercial bank operating in CEE country. We examined risk and performance indicators in the context of textual disclosures of six sections of the annual reports. We found out that sections the supervisory board and board of directors presented the weakest dependence followed by external environment and results. The strongest dependence has been found in sections assessment and information on expected economic and financial situation in upcoming year.