CEO overconfidence and financial crisis: Evidence from bank lending and leverage

Po-Hsin Ho, Chia-Wei Huang, Chih-Yung Lin and Ju-Fang Yen

Journal of Financial Economics, 2016, vol. 120, issue 1, 194-209

Abstract: Over a period that includes the 1998 Russian crisis and 2007–2009 financial crisis,banks with overconfident chief executive officers (CEOs) were more likely to weaken lending standards and increase leverage than other banksin advance of a crisis,making them more vulnerable to the shock of the crisis.During crisis years, they generally experienced more increases in loan defaults, greater drops in operating and stock return performance, greater increases in expected default probability, and higher likelihood of CEO turnover or failure than other banks.CEO overconfidence thus canexplain the cross-sectional heterogeneity in risk-taking behavior among banks.

Keywords: CEO overconfidence; Financial crisis; Bank lending; Bank leverage; Risk culture (search for similar items in EconPapers)
JEL-codes: G01 G21 G31 G32 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (124)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304405X16000222
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:120:y:2016:i:1:p:194-209

DOI: 10.1016/j.jfineco.2015.04.007

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().