Taming Overconfident CEOs Through Stricter Financial Regulation

Arbeitspapier

A large body of literature finds that managerial overconfidence increases risk-taking by financial institutions. This paper shows that financial regulation can be effective at mitigating this type of risk. Exploiting regulatory changes introduced after the financial crisis as a natural experiment, I find that overconfidence-induced risk-taking decreases in financial institutions subject to stricter regulation. Following the easing of these regulations, overconfidence-induced risk-taking increases again. These findings confirm the effectiveness of financial regulation at correcting overconfident behavior, but also suggest that the impact fades away quickly once removed.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Discussion Paper ; No. 375

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Financial Institutions and Services: Government Policy and Regulation ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Corporate Finance and Governance: Government Policy and Regulation ; Behavioral Finance: General‡
• Thema: overconfidence ; risk ; regulation ; financial sector

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Kassner, Bernhard
• Ereignis: Veröffentlichung
• (wer): Ludwig-Maximilians-Universität München und Humboldt-Universität zu Berlin, Collaborative Research Center Transregio 190 - Rationality and Competition
• (wo): München und Berlin
• (wann): 2023

Weitere Informationen

• Handle: http://hdl.handle.net/10419/282067
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ