CEO Overconfidence and Bank Payout Strategies

Kwabena A. Addo, Shams Pathan, Enrico Onali and Steven Ongena
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Kwabena A. Addo: Open University of the Netherlands
Shams Pathan: The German International University
Enrico Onali: University of Bristol
Steven Ongena: University of Zurich - Department Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)

No 26-65, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We examine the impact of CEO overconfidence on payout policies in U.S. banks over a period of more than two decades. We find that banks with overconfident CEOs have higher payout ratios and tend to smooth dividends to a greater extent than banks with non-overconfident CEOs. This finding contradicts those in the literature on nonfinancial firms, in which overconfident CEOs reduce payout ratios to invest more in risky projects. We also show that institutional ownership constrains payout ratios and investors tend to react less positively to dividend increase announcements when the bank CEO is overconfident.

Keywords: CEO overconfidence; bank dividend policy; dividend smoothing; dividend change announcements (search for similar items in EconPapers)
JEL-codes: G21 G28 G30 G38 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2026-09
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2665

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