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CEO Overconfidence and Bank Payout Strategies

Author

Listed:
  • 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))

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.

Suggested Citation

  • Kwabena A. Addo & Shams Pathan & Enrico Onali & Steven Ongena, 2026. "CEO Overconfidence and Bank Payout Strategies," Swiss Finance Institute Research Paper Series 26-65, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2665
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    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=7470980
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    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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