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The effect of CEO overconfidence on bank risk taking

Author

Listed:
  • Jijun Niu

    (Simon Fraser University)

Abstract

Recent studies document that some CEOs are overconfident. In this note, we examine the effect of CEO overconfidence on bank risk taking. We measure CEO overconfidence using press data, and bank risk taking using the standard deviation of stock returns. Controlling for a number of CEO- and bank-specific variables, we find that banks managed by overconfident CEOs take more risk.

Suggested Citation

  • Jijun Niu, 2010. "The effect of CEO overconfidence on bank risk taking," Economics Bulletin, AccessEcon, vol. 30(4), pages 3288-3299.
    • Handle: RePEc:ebl:ecbull:eb-10-00590
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    File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I4-P303.pdf
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    Citations

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    Cited by:

    1. Gietl, Daniel, 2018. "Overconfidence and Bailouts," Rationality and Competition Discussion Paper Series 132, CRC TRR 190 Rationality and Competition.
    2. Lee, Jin-Ping & Lin, Edward M.H. & Lin, James Juichia & Zhao, Yang, 2020. "Bank systemic risk and CEO overconfidence," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).
    3. Ho, Po-Hsin & Huang, Chia-Wei & Lin, Chih-Yung & Yen, Ju-Fang, 2016. "CEO overconfidence and financial crisis: Evidence from bank lending and leverage," Journal of Financial Economics, Elsevier, vol. 120(1), pages 194-209.
    4. Gietl, Daniel & Kassner, Bernhard, 2020. "Managerial Overconfidence and Bank Bailouts," Journal of Economic Behavior & Organization, Elsevier, vol. 179(C), pages 202-222.
    5. Sabri Boubaker & Taher Hamza, 2014. "Does managerial overconfidence matter in explaining debt financing policy?," Economics Bulletin, AccessEcon, vol. 34(4), pages 2324-2339.
    6. Lai, Shaojie & Liu, Shiang & Wang, Qing Sophie, 2023. "Déjà Vu: CEO overconfidence and bank mortgage lending in the post-financial crisis period," Journal of Behavioral and Experimental Finance, Elsevier, vol. 39(C).
    7. Damiano Bruno Silipo & Giovanni Verga & Sviatlana Hlebik, 2017. "Confidence And Overconfidence In Banking," Working Papers 201703, Università della Calabria, Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF.
    8. Adnan Safi & Xianrong Yi & Salman Wahab & Yingying Chen & Hassan Hassan, 2021. "CEO overconfidence, firm-specific factors, and systemic risk: evidence from China," Risk Management, Palgrave Macmillan, vol. 23(1), pages 30-47, June.
    9. Kuo, Ya-Fen & Lin, Yi-Mien & Chien, Hsiu-Fang, 2021. "Corporate social responsibility, enterprise risk management, and real earnings management: Evidence from managerial confidence," Finance Research Letters, Elsevier, vol. 41(C).

    More about this item

    Keywords

    CEO; overconfidence; bank; risk taking;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services

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