N°24-31: Overconfident Bank CEOs: Risk Amplification Amid Economic Uncertainty?

We examine whether overconfident bank CEOs attenuate or amplify risk exposure amid heightened economic policy uncertainty (EPU). Consistent with risk amplification channel, we find that banks led by overconfident CEOs exhibit nearly 9.1% higher risk during periods of high EPU relative to their peers. Further analyses suggest that overconfident CEOs fuel risk through aggressive credit extension and inadequate loan loss provisioning, leading to higher loan impairments and eroded bank performance.